INSTRUCTIONS: Do not round off any intermediats calculations. Final dollar answers should be rounded to two decimal places Unless otherwise indicated. final interest rate answers should be founded to 6 decimal places if expressed as a decimal or 4 decimal places if expressed as a percent. You do not need to show "trailing zeros" (i.c., if no non-zero digits remain, 2.5% will do instead of 2.500000%) but make certain there are none. Include a timeline for obtain part-marks in the event that you misinterpret the problem. 1. You are considering investing in JR stock. Your stockbroker has informed you that the expected return of JR is 16%. Further information reveals that the standard deviation of JR is 8%. Based on the information provided, you believe *) there is a 2.5% chance that the actual return of LBJ next year will be negative. b) there is a 2.5% chance that the actual return of LBJ next year will be positive. c) there is a 2.5% chance that the actual returns will exceed 32% d) there is a 32% chance that the actual retum of LBJ next year will be outside 0% and 32% e) (a) and (d) are true. 2. An individual common stock has a beta of 0.9 and a correlation coefficient of 0.9. the expected return of the stock is 20%, and the standard deviation of its retums is 12%. If a risk-free asset has an expected retum of 4%, then a) the expected return on the market portfolio is 22% b) the market returns' standard deviation is 12% c) the beta of the market returns is 0.9. d) both a) and b) are true c) both a) and c) are true 3. Two capital assets display the following: E(R) = 12% 0A = 1.5% E(R) -15% GR = 1.0% If asset A's return is 5% below the Capital Market Line (CML), and asset B's return is 1% below the CML, what is the equation of the CML? a) E(R) = 0.1203 -0.020 b) E(R) = 0.09 + 20 c) E(R) = 0.1227 +0.020 d) E(R) = 0.15 - 26 e) E(R) = 0.14 +20