1. A stock has an expected return of 17.16 percent, its beta is 1.67, and the expected return on the market is 11.8 percent. What must the risk-free rate be?

A. 4.7 percent

B. 3.8 percent

C. 4.2 percent

D. 5.3 percent

2. Calculate the standard deviation of the returns of Stock A shown below: State of Economy Probability of State of Economy Stock A Return Boom 0.30 40% Good 0.40 20% Poor 0.20 5% Bust 0.10 -30%

A. 20.27 percent

B. 17.88 percent

C. 15.81 percent

D. 13.92 percent