There are two stocks in the market, stock A and stock B. The price of stock A today is $65. The price of stock A next year will be $53 if the economy is in a recession, $73 if the economy is normal, and $85 if the economy is expanding. The probabilities of recession, normal times, and expansion are 0.2, 0.6, and 0.2, respectively. Stock A pays no dividends and has a beta of 0.68. Stock B has an expected return of 13 percent, a standard deviation of 34 percent, a beat of 0.45, and a correlation with stock A of 0.48. The market portfolio has a standard deviation of 14 percent. Assume the CAPM holds.
a) What are the expected returns and standard deviation of stock A?
b) If you are a typical, risk-averse investor with a well-diversified portfolio, which stock would you prefer?
c) What are the expected return and standard deviation of a portfolio consisting of 60 percent of stock A and 40 percent of stock B?
d) What is the beta of the portfolio in (c)?

David burdick is the ceo of acme bubblegum, a successful public company. as one of the cofounders of the company, burdick has enjoyed speaking and writing about the success of acme bubblegum for several years. typically, he speaks at conferences or directly to the press, but recently, he has been blogging about his firm anonymously. specifically, he defended a recent advertising campaign that was unpopular among consumers and pointedly attacked one of acme bubblegum’s competitors. burdick deeply enjoys his anonymous blogging and believes that none of his readers actually know that he works for acme bubblegum.should burdick be allowed to praise his company’s performance anonymously online? should he be allowed to attack his competitors without disclosing his relationship with the company? how would you feel if the ceo of a company at which you shopped was secretly writing criticisms of his or her competition? how would you feel if you knew a writer for your favorite blog was actually closely involved in a company that the blog discussed? 1. define the ethical issue? 2. who are the primary stakeholders? 3. what are the possible alternatives? 4. how could you evaluate the ethical implications of the alternative actions (use appropriate decision rules)? 5. what action would you recommend and why?