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1. Consider the following information on three stocks: State of Probability of Rate of Return Economy State of Economy if State Occurs Stock A Stock B Stock C Boom .25 .27 15 Normal 65 14 09 Bust 10 -.19 -.04 05 A portfolio is invested 45 percent each in Stock A and Stock B and 10 percent in Stock C. What is the expected risk premium on the portfolio if the expected T-bill rate is 3.2 percent? A) 11.47 percent B) 12.38 percent C) 1.67 percent D) 4.29 percent E) 8.71 percent 2. You own a portfolio that has $2,800 invested in Stock A and $3,250 invested in Stock B. The expected returns on these stocks are 14.7 percent and 9.3 percent, respectively. What is the expected return on the portfolio? A) 12.06 percent B) 12.36 percent C) 11.80 percent D) 11.13 percent E) 11.41 percent