5. Expected Return: Discrete Distribution

A stock's return has the following distribution:

Demand for the Company's Products	Probability of This Demand Occurring			Rate of Return if This Demand Occurs (%)
Weak		0.1		-35	%
Below average		0.2		-6
Average		0.4		6
Above average		0.2		30
Strong		0.1		50
		1.0

Calculate the stocks expected return and standard deviation. Do not round intermediate calculations. Round your answers to two decimal places.

Expected return: %

Standard deviation: %

6. Expected Returns: Discrete Distribution

The market and Stock J have the following probability distributions:

Probability	rM		rJ
0.3	14	%	21	%
0.4	9		4
0.3	17		12

1. Calculate the expected rates of return for the market and Stock J. Round your answers to one decimal place.

Expected rate of return (Market): %

Expected rate of return (Stock J): %

2. Calculate the standard deviations for the market and Stock J. Do not round intermediate calculations. Round your answers to two decimal places.

Standard deviation (Market): %

Standard deviation (Stock J): %

7. Required Rate of Return

Suppose r_RF = 4%, r_M = 9%, and r_A = 8%.

1. Calculate Stock A's beta. Round your answer to one decimal place.
2. If Stock A's beta were 1.1, then what would be A's new required rate of return? Round your answer to one decimal place.