1. You are provided with the following information:

Variance of the market portfolio = 0.12 Covariance of stock Z with the market = 0.06

Beta of stock Y = 1.8

What is the beta of a $5,000 portfolio that has $3,500 invested in stock Z and the remainder in stock Y?

2. If the risk-free rate is 4.5%, the expected return on the market is 8.9%, the standard deviation of market returns on an annualized basis is 21%, the standard deviation of returns for a stock on an annualized basis is 28% and the coefficient of correlation between market returns and the stocks returns is .75, what is the expected return for the stock?

3. Suppose you have $50 to invest in the S&P TSX 60 index. You decide to borrow an additional $50 so you can buy $100 worth of the index. If the standard deviation of returns on the index is 20% on an annual basis, what is the portfolio variance of your position?