1.A respected analyst forecasts that the return of the S&P 500 Index portfolio over the coming year will be 10%. The one-year T-bill rate is 5%. Examination of recent returns of the S&P 500 Index suggests that the variance of returns will be 324. The Sharpe ratio of the Index is: A) 0.18 B) 0.28 C) 0.015 D) 0.48 2.Suppose the real interest rate is 3% per year, and the expected inflation rate is 8%. What is the nominal interest rate? A) 13.3% B) 12.4% C) 11.24% D) 13.42% 3.Diversification is not effective when security returns are A) imperfectly negatively correlated B) negatively correlated C) perfectly positively correlated D) positively correlated