Twitter $($TWTR$)$ has a beta of $1\mathrm{.}51.$ If the expected return on the market is $9\mathrm{.}8\%,$ and the risk free rate is $0\mathrm{.}9\%,$ what is the expected return on Twitter stock according to the CAPM?

Question $5$

An oil exploration firm is currently searching for oil. Their probability of finding oil this year is $52\%$ and if they hit oil we expect the stock to return $35\%.$ If they do not hit oil we expect the stock to return $-13\%.$ What is the expected return of the stock?

Give your answer to two decimal places $(9\mathrm{.}99\%)$

Question $6$

If you hold a portfolio of many assets, the best measure of risk is the:

Standard Deviation $($volatility$)$

Beta

Question $7$

You form a portfolio by buying $$14983$ of Microsoft stock, and $$84329$ of Apple stock. Microsoft stock has a standard deviation of $27\%$ and Apple stock has a standard deviation of $34\%,$ and they have a correlation of $0\mathrm{.}45.$ What is the standard deviation of your portfolio?

Please give your answers to two decimal places $(9\mathrm{.}99\%)$

Question $8$

If we take a portfolio of average stocks and diversify away all the risk we can, we would expect to still have a volatility $($Standard Deviation$)$ of:

$30\%$

$20\%$

$40\%$

$10\%$

Question $9$

In a reasonably efficient market, if a stock has a beta of $0\mathrm{.}7$ we expect that it will have $(\_\_\_\_\_\_)$ exposure to market risk and $(\_\_\_\_\_\_\_)$ expected returns.

Average, Average

Above Average, Above Average

Below Average, Above Average

Above Average, Below Average

Below Average, Below Average

Question $10$

You form a portfolio by buying $$78812$ of American Airlines stock, and $$86584$ of Southwest stock. If American Airlines stock has an expected return of $10\mathrm{.}6\%$ and Southwest stock has an expected return of $11\%,$ what is the expected return of your portfolio?

Please give your answers to two decimal places $(9\mathrm{.}99\%)$