Answer the following $7$ questions using this information.

Let$$s assume you live in a world where there are only $2$ risky assets, asset A and asset B$.$ There is also a risk free asset. You have the following information about the assets:

Asset A Asset B Risk free $($F$)$

Expected Return $10\%20\%5\%$

Standard Deviation $15\%25\%0\%$

Let$$s assume the correlation between the returns of asset A and B is $+1.$ Make a portfolio P$1$ that invests $50\%$ in A and $50\%$ in B$.$ What's the expected return of portfolio P$1?$

Group of answer choices

$15\%$

$10\%$

$20\%$

$17\mathrm{.}5\%$

Flag question: Question $2$

Question $25$ pts

What's the standard deviation of portfolio P$1?$

Group of answer choices

$20\%$

$22\mathrm{.}5\%$

$25\%$

$27\mathrm{.}5\%$

Flag question: Question $3$

Question $35$ pts

Which statement about P$1$ is true?

Group of answer choices

You MAY prefer P$1$ to A$.$

You prefer P$1$ to A$.$

You prefer P$1$ to B$.$

You are indifferent between P$1$ to A$.$

Flag question: Question $4$

Question $45$ pts

Now assume that the correlation between the returns of asset A and B is zero. Make a portfolio P$2$ that invests $50\%$ in A and $50\%$ in B$.$ What's the expected return on P$2?$

Group of answer choices

$15\%$

$12\mathrm{.}5\%$

$17\mathrm{.}5\%$

$20\%$

Flag question: Question $5$

Question $55$ pts

What's the standard deviation of P$2?$

Group of answer choices

$14\mathrm{.}6\%$

$16\mathrm{.}4\%$

$15\mathrm{.}8\%$

$0$

Flag question: Question $6$

Question $65$ pts

Which statement about P$2$ is true?

Group of answer choices

You prefer P$2$ over A$.$

You MAY prefer P$2$ over A$.$

You prefer P$2$ over B$.$

You prefer B over P$2.$

Flag question: Question $7$

Question $75$ pts

What is the Sharpe ratio of P$2?$

Group of answer choices

$0\mathrm{.}68$

$1\mathrm{.}03$

$7\mathrm{.}05$

$4\mathrm{.}7$