Can anyone help me the first Question? It's hard..

Homework\tAssignment\t1 BUS\t315:\tInvestments\t(Spring\t2017) Total\tMarks:\t60 Percentage\tof\tFinal\tGrade:\t7.5% Instructions: To complete this assignment, you will need to read Chapters 4 to 8 from the textbook recommended for the course titled \"Bodie, Kane, Marcus, Perrakis and Ryan, Investments, 8th\tCanadian\tEdition\".\tNo\toutside\tresources\tneeded.\tIf\tyou\tcopy\tfrom\tany\tonline\twebsites, any\tother\tsolution\tmanuals,\ttest\tbanks,\tor\tpast\tstudents,\tit\twill\tbe\tconsidered\tplagiarism and\tyou\twill\treceive\tzero\tpoints.\tThen\tyour\tassignment\twill\tbe\tsent\tto\tuniversity\tdisciplinary committee\tfor\tfurther\taction.\tI\thave\tsent\tcouple\tstudents\tlast\tterm\tand\tthey\twere\tsuspended for\ttwo\tterms.\tSee\tthe\tguide\there: https://www.sfu.ca/students/academicintegrity/resources/academichonestyguide.html Each\tqualitative\tquestion\t(Except\tQuestion\tNo.\t1)\tshould\ttake\tmaximum\t1\tpage\tfor\tthe assignment.\tWrite\tyour\tname\tand\tID\tat\tthe\ttop\tright\thand\tcorner\tof\teach\tpage. The assignment has to be completely HANDWRITTEN. Markers will look at your correctness,\tclarity,\tneatness,\tand\thandwriting\twhile\tgrading. The\tassignment\tis\tdue\tby\t3pm,\tWednesday,\tFebruary\t22nd,\t2017.\tDrop\tthe\tassignment in\tthe\tassignment\tdropbox\tat\tthe\t3rd\tfloor\tof\tBeedie.\tPlease\task\tthe\tfront\tdesk\tor\tthe\tTAs if you cannot find it. No email submission will be accepted. Late submissions will receive\tzero\tpoints\tno\tmatter\twhat's\tthe\treason.\tSo,\tdo\tnot\tkeep\tit\tfor\tthe\tlast\tminute. Show all the steps in details to get full marks. Merely stating correct answers without calculation will not give you any point. Quantitative answers have to correct up to 2 decimal\tplaces. 1 Question\t1:\t(10\tmarks) You\thave\ttwo\tstocks\tA\tand\tB,\tand\ttheir\treturns\talong\twith\tS&P/TSX\treturn\tfor\tthe\tlast\t3 years Year Returns\tof Returns\tof Returns\tof A B S&P/TSX 1 7.0% -4.0% 9.0% 2 12.0% -6.5% -1.0% 3 6.5% 8.0% 11.0% a) Calculate the \"covariance\" and \"correlation\" between assets A and B. For this, use\taverage\t(mean)\treturn\tfor\tthe\tstocks.\t(4\tmarks) b) If\tyou\tare\twilling\tto\tinvest\t60%\tof\tyour\tmoney\ton\tA\tand\trest\ton\tB,\tcalculate\tyour \"expected\treturn\"\tand\t\"risk\"\tof\tthe\tportfolio.\t(3\tmarks) c) Calculate\tthe\t\"betas\"\tof\tstock\tA\tand\tB.\t(4\tmarks) Question\t2:\t(5\tmarks) What is a fair game? Explain how the term relates to a risk-averse investor's attitude toward\tspeculation\tand\trisk\tand\thow\tthe\tutility\tfunction\treflects\tthis\tattitude. Question\t3:\t(5\tmarks) Toby\tand\tHannah\tare\ttwo\trisk-averse\tinvestors.\tToby\tis\tmore\trisk-averse\tthan\tHannah. Draw one indifference curve for Toby and one indifference curve for Hannah on the same\tgraph.\tShow\thow\tthese\tcurves\tillustrate\ttheir\trelative\tlevels\tof\trisk\taversion. Question\t4:\t(5\tmarks) Draw\ta\tgraph\tof\ta\ttypical\tefficient\tfrontier.\tExplain\twhy\tthe\tefficient\tfrontier\tis\tshaped the\tway\tit\tis. 2 Question\t5:\t(5\tmarks) Discuss the differences between the \"capital market line (CML)\" and the \"security market\tline\t(SML)\". Question\t6:\t(5\tmarks) Discuss\tthe\tmutual\tfund\ttheorem. Question\t7:\t(5\tmarks) List\tand\tdiscuss\ttwo\tof\tthe\tassumptions\tof\tthe\tCAPM. Question\t8:\t(5\tmarks) Discuss the similarities and the differences between the CAPM and the single-factor model. Question\t9:\t(5\tmarks) Discuss\tthe\tadvantages\tof\t\"arbitrage\tpricing\ttheory\t(APT)\"\tover\tthe\t\"capital\tasset\tpricing model\t(CAPM)\"\trelative\tto\tdiversified\tportfolios. Question\t10:\t(5\tmarks) Discuss\tthe\tadvantages\tof\tthe\tmultifactor\tAPT\tover\tthe\tsingle\tfactor\tAPT\tand\tthe\tCAPM. What is one shortcoming of the multifactor APT and how does this shortcoming compare\tto\tCAPM\timplications? Question\t11:\t(5\tmarks) Security\tA\thas\ta\tbeta\tof\t1.0\tand\tan\texpected\treturn\tof\t12%.\tSecurity\tB\thas\ta\tbeta\tof\t0.75 and an expected return of 11%. The risk-free rate is 6%. Explain the arbitrage opportunity\tthat\texists;\texplain\thow\tan\tinvestor\tcan\ttake\tadvantage\tof\tit.\tGive\tspecific details\tabout\thow\tto\tform\tthe\tportfolio,\twhat\tto\tbuy\tand\twhat\tto\tsell. 3