1. If you want to allocate your funds between a market portfolio and a mutual fund, and given that you calculated the following statistics for each mutual fund individually which performance measure is the most relevant in this case?

2. According to the mean-variance criterion, which one of the following investments dominates all others?

E(r) = 0.15; Variance = 0.25

E(r) = 0.10; Variance = 0.20

E(r) = 0.15; Variance = 0.20

E(r) = 0.10; Variance = 0.25

3. Consider a two-factor model, with factors E and F. A factor portfolio (i.e., a factor mimicking portfolio) for factor E has the following properties (select all that you think are correct):

it has a beta of one on E

it has a beta of zero on E

it has a beta of one on F

it has a beta of zero on F

it is well-diversified

it is not necessarily well diversified