QUESTION 5 only

Use the following information for problem 3 and 4. Stock ABC has a beta=0.5, the risk free rate is 1 percent, the expected market return is 8 percent. 25 NN OUT 2 7.0% 27 28 3. Please calculate the market risk premium. 29 30 4. Using CAPM, what is the expected return of 31 stock ABC? 32 4.50% 33 5. Stock D has an expected return of 8% and stock E has an expected return of 10% What is the expected return of a portfolio that consists of 30% 34 of D and 70% of E? 35 36