Hello! I have quite a few questions which I know can be a nuisance, but I would love it if someone took their time to explain these 4 questions to me?

1. Currently, youre building an equally weighted portfolio of two securities. Both sec. have std. dev. equal to 10%. Their corr. coefficient is equal to 1. Assume that youre considering increasing the number of securities in your portfolio. Specifically, you want to build an equally weighted portfolio with 1,000 more securities, all with std. dev. equal to 10% and correlation (with all other securities in your portfolio) equal to 1. Whats the risk in your portfolio, if you include the additional 1,000 securities? (Note: you invest 100% of your capital in 1,002 securities, giving the same portfolio weight to each security) a. zero b. lower than 10% (but greater than 0) c. 10% d. 10020% e. infinity

2. ABC Corp. is a levered firm with a debt-to-equity ratio of .25. The beta of ABCs common stock is 1.5; while the beta of ABCs debt is 0.2 (the companys debt is not risk-free). The market risk premium is 8% and the risk free rate is 2%. The corporate tax rate is 30%. Assume that CAPM holds. Whats the appropriate discount rate for a new project that has the same risk of ABC company as a whole (i.e the same risk of the existing overall activities of ABC company)? a. 2% b. 11.48% c. 11.7% d. 11.92% e. 12.14%

3. Consider the following data: Expected return on Stock A = 10%, std. dev. of stock As returns = 20%; Expected return on Stock B = 12%, std. dev. of stock Bs returns = 24% Expected return on Stock C = 14%, std. dev. of stock Bs returns = 28%. Expected return on Stock D = 16%, std. dev. of stock Bs returns = 32% Assume that: The correlation between each stock is +1. Suppose you build a portfolio P, by investing of your savings in stock A, of your savings in stock B, of your savings in stock C, and of your savings in stock D. Given the above data what is the variance of portfolio P? a. 0.0576 b. 0.0676 c. 0.1856 d. 0.2258 e. 0.2600

4. Suppose you have the following data about the returns of two securities (A and B). Security A: std. dev. equal to 6%, correlation with the market portfolio equal to .8. Security B: std. dev. equal to 12%, corr. with the market portfolio equal to .2. Suppose further that you have the following data: risk-free rate equal to 4%, exp. return of the market portfolio equal to 6%, std. dev. of the market portfolio returns equal to 5%. According to CAPM, whats the exp. return of a portfolio invested 45% in security A and 55% in security B? a. 4.56% b. 5.39% c. 7.26% d. 8.02% e. 9.25%