plwasw answer questions 8-1 through 8-5

8-1 EXPECTED RETURN A stock's returns have the following distribution: Probability of This Demand Occurring Demand for the Company's Products Weak Below average Average Above average Strong Rate of Return if This Demand Occurs (30%) (14) 1.0 8-2 8-3 Calculate the stock's expected return, standard deviation, and coefficient of variation. PORTFOLIO BETA An individual has $20,000 invested in a stock with a beta of 0.6 and another $75,000 invested in a stock with a beta of 2.5. If these are the only two investments in her portfolio, what is her portfolio's beta? REQUIRED RATE OF RETURN Assume that the risk-free rate is 5.5% and the required return on the market is 12%. What is the required rate of return on a stock with a beta of 2? EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 3.5% and the market risk premium is 4%. What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.8? 8-4 8-5 BETA AND REQUIRED RATE OF RETURN A stock has a required return of 9%, the risk-free rate is 4.5%, and the market risk premium is 3%. a. What is the stock's beta? b. If the market risk premium increased to 5%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged