1.The risk-free rate is 1.7%, the market return is 9%, and the market volatility is 12%. In total you invested 200 pounds in the risk-free asset and 800 pounds in the market. What is the expected return of your portfolio?

a. 6.81%

b. 8.90%

c. 7.17%

d. 7.54%

2.You are building a new factory, which will generate yearly cash flows (cash flows are received at the end of a year). Your team of analysts expects that the factory will generate its first cash flow of $15mln in three years from today. Thereafter the cash flows will grow with 4% annually. The factory has an infinite life. This year you still need to pay 10mln to pay for the construction of the factory, but these costs have already been agreed upon last year. Further assume that the discount rate is 12%. What is the present value of these cash flows?

a. 149.47

b. 139.47

c. 99.65

d. 187.50