4. If the risk premium on market portfolio is 9%, annual risk premium of small company shares compared to large company shares is 2%, the extra return received on a share with high book to market ratio compared with low book to market ratio is 3%. The risk free rate stands at 7%. The company shares are highly sensitive to market movements thus they have a high B of 1.5. Sensitivity to size SMB (the difference between the returns of portfolios with small firms and portfolios with large firms) is small and the B is -0.02. Sensitivity to HML (the difference between the returns of portfolios with value firms and portfolios with growth firms) is 0.25. What is the expected risk premium? A. 12.21 B. 21.21 C. 21.12 D. 12.12 5. Mr Chris is presented with the following risk and return graph. Which of the following investments will be ideal? Return (%) *Rose *Iris * Tulip * Hebe Standard Deviation (%) A. Rose and Ivy B. Ivy and Iris C. Tulip and Ivy D. Iris and Lily E Hebe and Lily