1. Rosita owns a stock with an overall expected return of 14.40 percent. The economy is expected to either boom or be normal. There is a 52 percent chance the economy will boom. If the economy booms, this stock is expected to return 15 percent. What is the expected return on the stock if the economy is normal?
2. Tall Stand Timber stock has an expected return of 16.8 percent. What is the risk-free rate if the risk premium on the stock is 12.1 percent?
3. Travis has a portfolio consisting of two stocks, A and B, which is valued at $53,800. Stock A is worth $23,900. What is the portfolio weight of stock B?
4. Stock A has a standard deviation of 15 percent per year and stock B has a standard deviation of 8 percent per year. The correlation between stock A and stock B is .40. You have a portfolio of these two stocks wherein stock B has a portfolio weight of 40 percent. What is your portfolio variance?
5. Stock X has a standard deviation of 21 percent per year and stock Y has a standard deviation of 6 percent per year. The correlation between stock A and stock B is .38. You have a portfolio of these two stocks wherein stock X has a portfolio weight of 42 percent. What is your portfolio standard deviation?