Please answer all question

Question 11 pts

You wish to invest in a portfolio of stocks A (50%) and B (50%). The risk free rate is 4%.

A B

Expected return (%) 10 20

Beta 1.2 1.8

Correlation coefficient between returns 0.3

Whats the portfolio return?

18%

10%

20%

15%

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Question 22 pts

Whats the portfolio beta in the last question?

1.2

1.5

1.8

1.6

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Question 32 pts

The risk reduction through diversification in a portfolio of two stocks

decreases as the correlation between the stocks rises

increases as the correlation between the stocks declines

Both statements are correct

Not enough information

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Question 42 pts

A companys equity beta is 1.2. The risk-free rate is 5% and the market risk premium is 6%. What is the companys cost of equity?

13.1%

12.2%

6.2%

11%

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Question 52 pts

What is the expected return on the market portfolio at a time when the risk free rate (e.g., T-Bill rate) is 4% and a stock with a beta of 1.5 is expected to yield 16%?

12%

16%

10%

8%

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Question 61 pts

Whats the risk premium for the stock in the last question?

8%

12%

16%

10%