1. Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent. What is the required rate of return on a stock that has a beta of 0.7?
2. The market and Stock J have the following probability distributions:
|
Probability
|
rM
|
rJ
|
|
0.3
|
15%
|
20%
|
|
0.4
|
9
|
5
|
|
0.3
|
18
|
12
|
a. Calculate the expected rates of return for the market and Stock J.
b. Calculate the standard deviations for the market and Stock J.
c. Calculate the coefficients of variation for the market and Stock J.