1- The correlation coefficients between several pairs of stocks are as follows: Corr(A, B) = 0.85; Corr(A, C) = 0.60; Corr(A, D) = 0.45. Each stock has an expected return of 8% and a standard deviation of 20%. Your entire portfolio is now composed of stock A and you can add some of only one stock to your portfolio. Suppose that in addition to investing in one more stock you can invest in T-bills as well. If the T-bill rate is 8%, would you choose:

a- T-bill

b- C

c-B

d- D

f-Need more data

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

• E(r) = 0.10; Variance = 0.25
• E(r) = 0.15; Variance = 0.20
• E(r) = 0.15; Variance = 0.25
• E(r) = 0.10; Variance = 0.20