Please include the steps so i can do this myself for other excercises

Question1:

Suppose that there are many stocks in the security market and that the characteristics of stocksAandBare given as follows:

Stock Expected Return Standard Deviation

A 14% 7%

B 18 9 Correlation = -1

Suppose that it is possible to borrow at the risk-free rate,r_f. What must be the value of the risk-free rate? (Hint:Think about constructing a risk-free portfolio from stocksAandB.)

Riskfree rate=...

Question2

The following are estimates for two stocks.

Stock Expected Return Beta Firm-Specific Standard Deviation

A 10% 0.95 34%

B 14 1.45 42

The market index has a standard deviation of 23% and the risk-free rate is 12%.

a.What are the standard deviations of stocksAandB?(Do not round intermediate calculations.Round your answers to 2 decimal places.)

StockA...

StockB ...

b.Suppose that we were to construct a portfolio with proportions:

StockA 0.35

StockB 0.35

T-bills 0.30

Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio

Standard Deviation

Expected return ... %

Beta ...

Nonsystematic standard deviation ... %

Standard deviation ... %

Question3

Consider a portfolio that offers an expected rate of return of 11% and a standard deviation of 21%. T-bills offer a risk-free 6% rate of return.

What is the maximum level of risk aversion for which the risky portfolio is still preferred to bills?

Maximum level of risk aversion must be

(select one and give a value)

less than ....

greater than ...

.

Question4

Assume that you manage a risky portfolio with an expected rate of return of 19% and a standard deviation of31%. The T-bill rate is4%.

Your risky portfolio includes the following investments in the given proportions:

Stock A 31%

Stock B 32%

Stock C 37%

Suppose that your client decides to invest in your portfolio a proportionyof the total investment budget so that the overall portfolio will have an expected rate of return of16%.

a.What is the proportiony?(Round your answer to the nearest whole number.Omit the "%" sign in your response.)

Proportiony ....%

b.What are your client's investment proportions in your three stocks and the T-bill fund?(Do not round intermediate calculations. Round your answers to 2 decimal place. Omit the "%" sign in your response.)

Investment

Proportions

T-Bills ... %

Stock A ... %

Stock B .... %

Stock C ... %

c.What is the standard deviation of the rate of return on your client's portfolio?(Do not round intermediate calculations. Round your answer to 2 decimal place. Omit the "%" sign in your response.)

Standard deviation ... %