Passive Stock Market Investor (PSMI) holds one stock market index ETF in his/her portfolio, but has learned that investing in a bond market index ETF as well may reduce his/her portfolio risk due to diversification.The annual returns for both ETFs for the last ten years are listed below.Measured by the standard deviation of returns, by how much would PSMI's portfolio's historical risk been reduced if PSMI invested 60% in the stock market index ETF and 40% in the bond market index ETF rather than his current allocation of 100% in the stock market index ETF?

Year Stock ETF Bond ETF

2009 39.00% 5.00%

2010 18.00% 6.00%

2011 1.00% 8.00%

2012 16.00% 4.00%

2013 34.00% -3.00%

2014 13.00% 5.00%

2015 0.00% 0.00%

2016 13.00% 2.00%

2017 21.00% 4.00%

2018 -5.00% 0.00%

Q2. Suppose Mature No Dividends Corporation's free cash flow during the just-ended (t = 0) year was $175 million, and FCF is expected to grow at a constant rate of 6% in the future.If the weighted average cost of capital is 17%, what is the firm's value of operations, in millions?

Q3. Diversified Industries, Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$18 million (negative), but its FCF at t = 2 will be $35 million.After Year 2, FCF is expected to grow at a constant rate of 4% forever.If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?