Problem 1: The risk-free rate of return is currently 5 percent, whereas the market risk premium is 11 percent. If the beta of Briar Tek's stock is 2, then what is the expected return on Briar Tek?
Problem 2: A stock portfolio is equally allocated among Stock A, B, and C. Stocks A, B, and C have betas of 1.9, 1, and 0.57, respectively. The market has just risen 4%. What would you expect to happen to this stock portfolio?
A. The stock portfolio will rise 3.8%.
B. The stock portfolio will rise 4%.
C. The stock portfolio will rise 4.6%.
D. The stock portfolio will rise 5%.