Problem $1$:

Roenfeld Corp believes the following probability distribution exists for its stock. What is the coefficient

of variation on the company's stock?

Probability Stock's

State of of State Expected

the Economy Occurring Return

Boom $0\mathrm{.}4525\%$

Normal $0\mathrm{.}5015\%$

Recession $0\mathrm{.}055\%$

Problem $2$:

A mutual fund manager has a $$40$ million portfolio with a beta of $1\mathrm{.}00.$ The risk$-$free rate is $4\mathrm{.}25\%,$ and

the market risk premium is $6\mathrm{.}00\%.$ The manager expects to receive an additional $$60$ million, which she

plans to invest in additional stocks. After investing the additional funds, she wants the fund's required

and expected return to be $13\mathrm{.}00\%.$ What must the average beta of the new stocks be to achieve the target

required rate of return?

Problem $3$:

A stock has a beta of $1\mathrm{.}8.$ A security analyst who specializes in studying this stock expects its return to

be $18$ percent. Suppose the risk$-$free rate is $5$ percent and the expected market risk premium is $8$

percent. Is the analyst pessimistic or optimistic about this stock relative to the market expectations?