1. Meraki Inc. has an expected annual return of 7% with a standard deviation of 19%. Assume returns are normally distributed.

a. What is the probability of earning a return less than -12%?

b. What is the probability of earning a return less than 45%?

c. What is the probability of earning a return between -12% and 45%?

2. You've invested the following amounts into a three-stock portfolio:

Stock	Investment
1	$5,000
2	$12,000
3	$6,000

a. What is the portfolio weight for stock 1?

b. What is the portfolio weight for stock 2?

c. What is the portfolio weight for stock 3?

3. An investor wants to invest money in Treasury bills and a risky fund managed by Infinity Capital. The investor wants to achieve an expected return of 9% on his complete portfolio. Infinity Capital has an expected return of 11% and a standard deviation of returns of 25%. T-bills have a return of 6%.

a. What proportion of his total investment should he invest in the risky fund in order to achieve the expected return?

b. What is the standard deviation of the complete portfolio?

4. Suppose that you are managing a portfolio with a standard deviation of 29% and an expected return of 22%. The Treasury bill rate is 9%. A client wants to invest 21% of his investment budget in a T-bill money market fund and 79% in your fund.

a. What is the expected rate of return on your client's complete portfolio?

b. What is the standard deviation for your client's complete portfolio?

c. What is the reward-to-volatility (Sharpe) ratio of your client's complete portfolio?

d. What is the Sharpe ratio of your portfolio?

5. Suppose that you manage a portfolio with a standard deviation of 24% and an expected return of 17%. Your portfolio consists of the following investments:

Type	Proportion
Stock A	33%
Stock B	29%
Stock C	19%
Stock D	19%

The Treasury bill rate is 8%. An investor wants to invest a proportion of his investment budget in a T-bill money market fund and the remaining proportion in your fund.

a. What proportion of the investor's money should be invested in your fund in order to achieve an expected return of 11%?

b. What proportion of the investor's complete portfolio will be invested in stock B?