Assume that Dell and McDonalds had the following risk characteristics:

	Dell	McDonalds
(beta)	1.28	0.89
Yearly standard deviation of return (%)	28.70	18.8

Assume the standard deviation of the return on the market was 17%.

a.	The correlation coefficient of Dells return versus McDonalds was 0.34. What was the standard deviation of a portfolio invested half in Dell and half in McDonalds? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Standard deviation

%

b.	What was the standard deviation of a portfolio invested one-third in Dell, one-third in McDonalds, and one-third in risk-free Treasury bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Standard deviation

%

c.

What was the standard deviation if the portfolio is split evenly between Dell and McDonalds and is financed at 50% margin, that is, the investor puts up only 50% of the total amount and borrows the balance from the broker? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Standard deviation

%

d.	What was the approximate standard deviation of a portfolio composed of 100 stocks with betas of 1.28 like Dell? How about 100 stocks like McDonalds? (Hint: Part (d) should not require anything but the simplest arithmetic to answer.) (Round your answers to 2 decimal places.)

	Standard Deviation
Dell	%
McDonalds	%