Q1 (25 marks) E B a) Consider the following information: State Boom Probability of State 0.65 Stock X 0.07 Rate of Return Stock Y 0.15 Stock Z 0.33 0.06 Bust 0.35 0.13 0.03 What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 20% each in X and Y and 60% in Z? O Boom 0.07 0.15 0.65 0.35 Bust 0.33 0.06 0.13 0.03 What is the expected return on an equally weighted portfolio of these three stocks? b. What is the variance of a portfolio invested 20% each in X and Y and 60% in Z? O b) Smart. Corporation. is trying to determine its cost of debt. The firm has a debt issue outstanding with 23 years to maturity that is quoted at 97% of face value. The issue makes semiannual payments and has an embedded cost of 5% annually. Assume the par value of the bond is $1.000. a) What is the company's pre-tax cost of debt? b) If the tax rate is 35%, what is the after-tax cost of debt