1. Suppose that an investor has $100,000 to invest. The investor has chosen to construct a portfolio containing 25% of a risk-free treasury bill (5% rate of return) and 75% of risky assets. The risky portion of the complete portfolio is composed of 50% stock (10% expected rate of return and 25% standard deviation) and 50% bond (6% rate of return and 12% standard deviation) with zero covariance. What is the expected rate of return and standard deviation of the complete portfolio.

a) 7,25%, 10,40%

b) 7,50%, 10,60%

c) 7,25%, 10,00%

d) 7,75%, 10,40%

e) other

2. Suppose that the initial investment budget is $300,000 but the investor borrows additional funds for $120,000 from a risk-free rate of 5% in order to invest the total amount in a risky asset. The risky asset provides an expected return of 12% per year with 82% probability. What would be the expected return and the risk of the portfolio?

a) 14,80%, 27,00%

b) 14,80%, 25,20%

c) 15,30%, 26,50%

d) 14,40%, 27,00%

e) other