1. The risk-free rate is 5.25%. The expected return on the market is 12% with a standard deviation of 18%. What is the standard deviation of an efficient portfolio with a 16% expected return?

a) 10.12%

b) 19.11%

c) 7.33%

d) 28.67%

2.

State of the Economy		Probability of Occurrence		Stock X Expected Return		Stock Y Expected Return		Stock Z Expected Return
Recession		35%		25%		-10%		15%
Average		45%		14%		8%		25%
Boom		20%		4%		14%		-10%

What is the correlation between stocks X and Z?

a) 0.26

b) 0.51

c) 0.96

d) -0.26