1. AT&T had stock prices at the beginning of each year and the total dividend paid during the year in the past four years as the following. Assuming you invested in AT&T at the beginning of each year:

Year	Beginning of Year Price	Annual dividend
2010	29.68	1.68
2011	30.46	1.72
2012	34.39	1.76
2013	35.24	1.80

(Data source: Yahoo Finance)

Find the annual HPR (Holding period return) for each year of 2010, 2011, and 2012.

What is the arithmetic average return for those 3 years?

What is the geometric average return for those 3 years?

2. You have the following information for a risky portfolio for several recent years. Assume that the stock pays no dividends.

2008 : $50.00

2009: $55.00

2010: $51.00

2011: $54.00

What is the standard deviation of the returns for the period? (Step 1: Find annual holding period returns. Step 2: Find the arithmetic average return. Step 3: Calculate standard deviation)

3.A loan for a new car costs the borrower 0.8% per month. What is the EAR?

4. You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. The risky portfolio, P, has a standard deviation of 0.7. Assuming you decide to hold a complete portfolio that has an expected return of 8%:

What is the expected return of your risky portfolio?

What is the weight you invested in Treasury bills? What is the weight you invested in risky portfolio? (hint: rc = wp*rp + wf*rf; and wf = 1-wp)

What is the variance of the complete portfolio?

What is the price of risk of the complete portfolio?

What is the sharp ratio of the CAL?

** Show all work and steps**