Please answer each of the following questions in detail. Include examples whenever applicable.

1. Explain the criteria for assessing performance of a security, namely, expected rate of return, standard deviation of rate of return, and coefficient of variation (CV). Explain how by forming a portfolio an instrument can be generated that has properties better than each of its constituents in terms of the standard deviation of rate of return and CV.

2. Suppose that the corporation is offered an investment which has the following cash flows. Please justify if the project is feasible based on weighted average cost of capital (WACC).

Table 2 Cash flows for the proposed project Year 0 1 2 3 Cash $10 $1,5 $1,5 $1,5 flow In million dollars 9 10 4 5 6 7 8 $1,5 $1,5 $1,5 $1,5 $1,5 $1,5 $1,5