Part II $-20$ points each

Provide your answer in the space following each question. Make certain your answer is clearly

marked. Show your work.

Stonk Capital Management is evaluating assets for potential investment. They have

identified a few possible outcomes for these assets over the next year, detailed in the

table below. Use the table to answer the following questions.

Assume a risk$-$free rate of $2\%.$

$($a$)(5$ points$)$ What is the expected return of Asset A$?$

$($b$)(5$ points$)$ What is the volatility of Asset A$?$

FIN$-3144$

Midterm I, Page $5$ of $10$

Oct $3,2023$

$($d$)(5$ points$)$ In this case, out of all possible portfolios that consist only of these risky

assets, there is a simple one that strictly dominates all other possible combinations

for all investors regardless of risk aversion. What is that portfolio?