1) Suppose you have the following data for Stock A and the market portfolio:

2) Suppose the market portfolio has the following parameters: E(Rm) = 10%, and m = 10%. You hold an efficient portfolio with p = 20%, and the mean return on your portfolio is 15%: a. Do you borrow or lend? How much? b. What is the risk-free interest rate?

Year 1 Rate of return on Stock A 5% 3% 20% Rate of return on the Market 8% -2% 2 3 30% a. Calculate B b. Calculate o c. Calculate the systematic and non-systematic risk component. Discuss these risks in pro- portional terms