Based on the probability and percentage of return for the three economic states in the table below, compute the expected return.Economic StateProbabilityPercentage of ReturnFast Growth0.1060Slow Growth0.5030Recession0.40-23If the risk-free rate is 7 percent and the risk premium is 4 percent, what is the required return?Suppose that the average annual return on the Standard and Poor’s500 Index from 1969 to 2005 was 14.8 percent. The average annual T-billyield during the same period was 5.6 percent. What was the market riskpremium during these 10 years?Conglomco has a beta of 0.32. If the market return is expected tobe 12 percent and the risk-free rate is 5 percent, what is Conglomco’srequired return? Use the capital asset pricing model (CAPM) to calculateConglomco’s required return.Calculate the beta of a portfolio that includes the following stocks:Conglomco stock, which has a beta of 3.9 and comprises 35 percent of the portfolio.Supercorp stock, which has a beta of 1.7 and comprises 25 percent of the portfolio.Megaorg stock, which has a beta of 0.3 and comprises 40 percent of the portfolio.
