Question: 3. Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Probability Return Fast Growth 0.30 40% Slow

3. "Compute the expected return given these three economic states, their likelihoods, and the potential returns:"


Economic State	Probability	Return
Fast Growth	0.30	40%
Slow Growth	0.50	10%
Recession	0.20	%u221225%

4. "If the risk-free rate is 6 percent and the risk premium is 5 percent, what is the required return?"

5. "The average annual return on the Standard and Poor's 500 Index from 1986 to 1995 was 15.8 percent. The average annual T-bill yield during the same period was 5.6 percent. What was the market risk premium during these 10 years?

6. "Hastings Entertainment has a beta of 0.24. If the market return is expected to be 11 percent and the risk-free rate is 4 percent, what is Hastings' required return?" Use the capital asset pricing model to calculate Hastings' required return.

7. Calculate the beta of your portfolio, which comprises the following items: (a) Olympic Steel stock, which has a beta of 2.9 and comprises 25 percent of your portfolio, (b) Rent-a-Center stock, which has a beta of 1.5 and comprises 35 percent of your portfolio, and (c) Lincoln Electric stock, which has a beta of 0.2 and comprises 40 percent of your portfolio.

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