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The risk free rate is 4.0%. Stock A has an expected return of 12.5% and a...

The risk free rate is 4.0%. Stock A has an expected return of 12.5% and a standard deviation of return of 60%. Stock B has an expected return of 7.0% and a standard deviation of return of 90.0%. The market portfolio has an expected return of 10.0% and a standard deviation of return of 40.0%.

a. What is each stock’s β?

b. What is the correlation between each stock’s returns and the returns to the market portfolio?

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