1. (4 points) You invest 30% of funding in Stock M and the rest in Stock N. The return on Stock M is 12% and its standard deviation is 7%. The return on Stock N is 25% with a standard deviation of 11%. Assume the two stocks have a correlation coefficient of 0.3. Calculate this portfolios return and standard deviation.

2. (2 points) If you invest your money in 3 stocks: A, B, C. Each stock has a return of 11%, 15%, and 21%. Your funding allocation on the stocks is: 30:30:40. Calculate your portfolio return.

3. (4 points) Suppose you own a portfolio that has a beta risk of 1.2. Treasury bond yield is assumed to be 5%, and the stock market return on average is 11%. What should be your required return on this portfolio if you use CAPM in your estimation? What is the stock market risk premium? What is your portfolios risk premium?