Question: 1. Below are the returns for different asset classes for a particular year: Asset class Return T-bills 1.3% Corporate bonds 4.9% Small company stocks 17%

1. Below are the returns for different asset classes for a particular year:

Asset class	Return
T-bills	1.3%
Corporate bonds	4.9%
Small company stocks	17%
Large company stocks	9.5%

a. What was the excess return for corporate bonds?

b. What was the excess return for small company stocks?

c. What was the excess return for large company stocks?

2. Suppose that you manage a portfolio with a standard deviation of 24% and an expected return of 17%. Your portfolio consists of the following investments:

Type	Proportion
Stock A	33%
Stock B	29%
Stock C	19%
Stock D	19%

The Treasury bill rate is 8%. An investor wants to invest a proportion of his investment budget in a T-bill money market fund and the remaining proportion in your fund.

a. What proportion of the investor's money should be invested in your fund in order to achieve an expected return of 11%?

b. What proportion of the investor's complete portfolio will be invested in stock B?

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