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  3. 4. a stock is expected to produce the following re

4. A stock is expected to produce the following returns given the various states of...

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4. A stock is expected to produce the following returns given the various states of the economy. What is the expected return on this stock? State of Economy Probability of State of Rate of Return Recession Normal Boom 0.05 0.7 0.25 0.05 0.09 0.14 7.89% 10.05% 10.50% 12.03% a. b. c. d. 5. You own a portfolio of two stocks, A and B. Stock A is valued at $6,500 and has an expected return of 11.2%. Stock B has an expected return of 8.1%, what is the expected return on the portfolio if the portfolio value is $9.500? 9.58% 7.40% 16.15% 10.22% a. b. . d. 6. Which of the following statements is/are CORRECT? a. The stock with a beta value of 1 has the market rate of return. b. Betas measure a stock's diversifiable risk. c. Adding more stocks will reduce the portfolio's systematic risk. d. Both a and c are correct. 7. Which of the following statements is/are INCORRECT? a. Beta cannot be negative. b. Beta value is the slope of SML c. Market risk premium is the slope of SML d. GDP and inflation rate can be considered market risks. e. Both a and b are incorrect

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