A. John invests $100 in a risky asset with a 25% standard deviation and an expected return of 20%. The T-bills pays a return of 4.0%. The slope of the capital allocation line formed with the risky asset and the risk free asset is equal to ________.

1. 0.44

2. 0.89

3. 0.25

4. 0.64

B. The index model for stock B has been estimated with the following result: RB = 0.01 + 1.2 R M + eB. If M = 0.20 and R 2 B = 0.60, the standard deviation of the return on stock B is

		0.2026.
		0.3098.
		0.4119.
		None of the options
		0.3951.

Please answer both questions