19. Suppose Corr(, ) = 0 , = = 1, ( ) = ( ) , and = 1 2 . What is the volatility of your portfolio which is a mix of risky portfolios (a) and (b)?

1) 60.71%

2) 70.71%

3) 80.71%

4) 90.71%

5) 100.71%

20. There are one risky portfolio P and one riskless asset F. The expected return of P is E[rp,t+1] = 9%. The volatility of P is 20%. The riskfree rate is rf = 2%. Your professor James will choose an optimal weight for this capital allocation problem as he taught in the class. What would be Sharpe ratio of his optimal portfolio? Assume you dont know his price of risk A.

1) 0.35

2) 0.45

3) 0.55

4) 0.65

5) 0.75

21. Suppose the expected return of the market portfolio is 9%, volatility of the market portfolio is 14%, and the risk-free rate is 2%. Compute the CAPM beta, expected return, volatility, and Sharpe ratio of your portfolio when you invest 60% in the market portfolio and 40% in the riskfree asset.

1) Beta = 0.6, Expected return = 6.2%, Volatility = 8.4%, and SR=0.5

2) Beta = 0.6, Expected return = 6.2%, Volatility = 8.4%, and SR=0.3

3) Beta = 0.6, Expected return = 4.2%, Volatility = 8.4%, and SR=0.5

4) Beta = 1, Expected return = 4.2%, Volatility = 10.4%, and SR=0.3

5) Beta = 1, Expected return = 6.2%, Volatility = 10.4%, and SR=0.5

22. Suppose the CAPM beta of the stock A, B, and C are 1.2, 0.3, and 0.8, respectively. Compute the CAPM beta of your portfolio which is a mix of the stock A, B, and C with the weight (25%, 50%, 10%) on A, B, and C.

1) 0.35

2) 0.53

3) 0.60

4) 0.84

5) 1.06

Please help solve the above problems and show all work.