Question: 1A) What is the expected return for a stock that has a beta of 1.5, if the risk-free rate is 6% and the market rate

1A)

What is the expected return for a stock that has a beta of 1.5, if the risk-free rate is 6% and the market rate of return is 11%?

Barbara is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment.

ProbabilityReturn

Boom 0.3 25.00%

Good 0.3 15.00%

Level 0.2 10.00%

Slump 0.2 -5.00%

a)Use the table of returns and probabilities above to determine the expected return on Barbara's investment?round to 3 decimal places

Expected return?

b)Use the table of returns and probabilities above to determine the standard deviation of the return on Barbara's investment?round to 5 decimal places

Standard deviation?

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