8 & 10

8Which statement below is false?

A.The three-month U.S. Treasury bill rate is a useful proxy for the risk-free rate.

B.The risk-free rate of return is the theoretical rate of return of an investment with zero risk.

C.The efficient frontier is composed of risky assets only.

D.The market (tangency) portfolio contains positive amounts of all risky assets and the risk-free asset.

E.The real risk-free rate can be computed by subtracting the current inflation rate from the yield of the treasury bond matching your investment duration.

10 Recall our discussion on portfolio betas. Now imagine that you own a stock portfolio that has a market beta of 2.4, but you are getting married to someone who has a portfolio with a market beta of 0.4. You are three times as wealthy as your future significant other. What is the beta of your joint portfolio?

A.1.5

B.0.15

C.-0.15

D.1.9

E.-1.5