1. Why do you think most long-term financial planning begins with sales forecasts? Put differently, why are future sales the key input?
2. You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 45 percent in Stock T. The betas for these four stocks are 1.72, 1.13, 1.3, and 1.53, respectively. What is the portfolio beta?
3. A stock has a beta of 1.2, the expected return on the market is 11 percent, and the risk-free rate is 4.95 percent. What must the expected return on this stock be?