portfolio liquidity illiquidity premium         WEBSITES The sites listed below can be used to assess beta coefficients for individual securities and mutual funds.   http://finance.yahoo.com http://moneycentral.msn.com/investor/home.asp http://bloomberg.com http://www.411stocks.com/   The site listed below contains information useful for individual investors related to modern portfolio theory and portfolio allocation.   http://www.efficientfrontier.com           PROBLEMS 1. What is the beta of a portfolio with E(rP) 18%, if rf 6% and E(rM) 14%? 2. The market price of a security is $50. Its expected rate of return is 14%. The risk-free rate is 6% and the market risk premium is 8.5%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant div- idend in perpetuity. 3. You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars):     Years from Now After-Tax Cash Flow   0 40 1-10 15     The projects beta is 1.8. Assuming that rf 8% and E(rM) 16%, what is the net present value of the project? What is the highest possible beta estimate for the project before its NPV becomes negative? 4. Are the following true or false? a. Stocks with a beta of zero offer an expected rate of return of zero. b. The CAPM implies that investors require a higher return to hold highly volatile securities. c. You can construct a portfolio with beta of .75 by investing .75 of the investment budget in T-bills and the remainder in the market portfolio. 5. Consider the following table, which gives a security analysts expected return on two stocks for two particular market returns: