Please answer both questions:

1. If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A)

Portfolio	Expected Return			Beta
A		12	%		1.3
Market		12	%		1.0

B)

Portfolio	Expected Return			Standard Deviation
A		15	%		13	%
Market		10	%		21	%

C)

Portfolio	Expected Return			Beta
A		20.4	%		2.2
Market		12	%		1.0

D)

Portfolio	Expected Return			Beta
A		15	%		1.3
Market		10	%		1.0

		Option A
		Option B
		Option C
		Option D

2.

You write one MBI July 139 call contract (equaling 100 shares) for a premium of $17. You hold the option until the expiration date, when MBI stock sells for $150 per share. You will realize a ________ on the investment.

		$1100 loss
		$600 profit
		$2800 loss
		$1100 profit