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1) Sam has $100,000 stock portfolio. $35,000 is invested in stock with beta of 0.80 and remainder is invested in stock with a beta of= 1.65. These are the only 2 investments in his portfolio. What is his portfolio’s beta?

2) ABC Company's stock has beta of= 1.50, risk-free rate is= 2.75%, and market risk premium is 6.25%. Compute ABC's required rate of return by using CAPM?

3) Strong Iron Works believes given probability distribution exists for its stock. Compute the coefficient of variation on the company's stock?

State of Economy Probability of State Occurring Stock's Expected Return
Boom 0.30 35%
Normal 0.50 15%
Recession 0.20 3%

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