1a. Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of return with a probability of 30% or a 4% rate of return with a probability of 70%. Second, a Treasury bill that pays 6%. The risk premium on the risky investment is _________.

a. 1%

b. 3%

c.1.3%

d. 9%

1b. your complete portfolio is 40% invested in a risky asset and 60% invested in a treasury bill. the risky asset has an expected rate of return of 20% and a standard deviation of 15% and the treasury bill has a rate of return of 6%. the sharpe ratio of your complete porfolio is approximately _____.

a. 1.05

b. .93

c. .50

d. .34