Consider the following data on returns (R), standard deviation (), and correlations (r) for two stocks:

R₁ = 10%, ₁ = 4%, R₂ = 20%, ₂ = 6%, r₁₂ = -1.0

Find the weights of stocks 1 and 2 (W1 and W2) that will yield the minimum variance of a portfolio of stocks 1 and 2.

	1.	W1=0.70, W2=0.30
	2.	W1=0.50, W2=0.50
	3.	W1=0.40, W2=0.60
	4.	W1=0.60, W2=0.40

QUESTION 2

1. Suppose Yon Sun Corporation's free cash flow during the just-ended year (t = 0) was $120 million, and FCF is expected to grow at a constant rate of 7% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions?

   		$1155
   		$1605
   		$1,050
   		$1,103
   		$1,158

QUESTION 3

1. The Ramirez Company's last dividend was $1.75. Its dividend growth rate is expected to be constant at 25% for 2 years, after which dividends are expected to grow at a rate of 6% forever. Its required return (r_s) is 12%. What is the best estimate of the current stock price?

   		$41.58
   		$42.64
   		$43.71
   		$44.80
   		$45.92