1. Suppose the risk-free rate is equal to 1%. Which one of the following portfolios has the lowest Sharpe ratio?

a. Expected return of 5%, standard deviation of 20%

b. Expected return of 2% standard deviation of 30%

c.Expected return of 5%, standard deviation of 30%

d.Expected return of 2% standard deviation of 20%

2. You invest in a mutual fund and your holding period return is 100% in the first year, and- 20% in the second year. What is your annualized holding period return over the two years?

a.60 percent

b.80 percent

c.40 percent

d. 26 percent

3. Suppose you buy a put option with exercise price of $80. The optionn premius is $5. What is your maximum profit?

a.$75

b.5

c.80

d. Your profit is unlimited

4.If all other characteristics are otherwise the same, which of the following coupon paying bonds has the smallest duration:

a.time to maturity= 8 years, coupon rate= 4%

b.time to maturity= 8 years, coupon rate= 2%

c.time to maturity= 2 years, coupon rate= 2%

d.time to maturity= 2 years, coupon rate= 4%