Q:-

The following table provides information on the return distribution for Firm A and the Market portfolio. The firm is 100% equity.

State of the Economy	Probability	Return on Market Portfolio	Firm A Returns
			Division 1	Division 2
Recession	0.1	-0.1	-0.2	-0.07
Normal Growth	0.45	0.11	0.12	0.06
Strong Growth	0.3	0.17	0.22	0.11
Boom	0.15	0.45	0.57	0.22
Correlation with Market Portfolio			0.9	0.75

Lastly:

• Risk free rate = 3%.
• Expected return on the market = 15.8%
• Standard deviation of market returns = 14.33%
• Market of Divisions:
  • The market value of Division 1 is $2 million.
  • Market value of Division 2 is $3 million.

Q(a): Please compute the expected return and standard deviation of returns for each Division.

Q(b): What is the beta for each division?

Q(c): What is the market value of Firm A?

Q(d): Please compute the expected return for Firm A.

Q(e): What is the Firm As beta? (Hint: Think about the beta on a portfolio of assets)

Request: Please share your steps of solution with answers highlighted.