Problem 2-2. Show all work and formulas.

Portfolio Beta Your investment club has only two stocks in its portfolio. $20,000 is invested in a stock with a beta of 0.7, and $35,000 is invested in a stock with a beta of 1.3. What is the portfolio's beta? Required Rate of Return AA Industries' stock has a beta of 0.8. The risk-free rate is 4% and the expected return on the market is 129b. What is the required rate of return on AA's stock? Required Rates of Return Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7? Fama-French Three-Factor Model An analyst has modeled the stock of a company using the Fama-French three- factor model. The risk-free rate is 5%, the market return is 10%, the return on the SMB portfolio (r_SMB) is 3.2%, and the return on the HML portfolio (r_HML) is 4.8%. If a_i = 0, b_i = 1.2, c_i = -0.4, and d_ = 1.3, what is the stock's predicted return