For the final answers, round your answer to the nearest 4 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed.

Q1) There is a 15.50% probability of a below average economy and a 84.50% probability of an average economy. If there is a below average economy stocks A and B will have returns of 4.60% and 11.40%, respectively. If there is an average economy stocks A and B will have returns of 17.60% and -5.50%, respectively. Compute the: a) Expected Return for Stock A (0.75 points):

b) Expected Return for Stock B (0.75 points):

c) Standard Deviation for Stock A (0.75 points):

d) Standard Deviation for Stock B (0.75 points):

Q2) There is a 37.00% probability of an average economy and a 63.00% probability of an above average economy. You invest 46.50% of your money in Stock S and 53.50% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 10.60% and 11.20%, respectively. In an above average economy the the expected returns for Stock S and T are 16.50% and 10.40%, respectively. What is the expected return for this two stock portfolio?

Q3) You are invested 32.60% in growth stocks with a beta of 1.87, 28.00% in value stocks with a beta of 0.72, and 39.40% in the market portfolio. What is the beta of your portfolio? (1 point)

Q4) An analyst gathered the following information for a stock and market parameters: stock beta = 1.21; expected return on the Market = 11.40%; expected return on T-bills = 2.30%; current stock Price = $8.60; expected stock price in one year = $13.49; expected dividend payment next year = $3.37. Calculate the a) Required return for this stock (1 point):

b) Expected return for this stock (1 point):

Q5) The market risk premium for next period is 7.70% and the risk-free rate is 2.20%. Stock Z has a beta of 0.63 and an expected return of 15.00%. What is the: a) Market's reward-to-risk ratio? (1 point):

b) Stock Z's reward-to-risk ratio (1 point):