Q7 Q8

7 Consider the following two investment alternatives: First, a risky portfolio that pays a 15% rate of return with a probability of 30% or a 4% rate of return with a probability of 70%. Second, a Treasury bill that pays 6%. The risk premium on the risky portfolio is A. 1% B.3% C. 13% D.9% 8. You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 1656 and a standard deviation of 20% and a Treasury bill with a rate of return of 6%.- _ of your complete portfolio should be invested in the risky portfolio if you want your complete portfolio to have an expected retum of 18%. A.120% B.90% C.40% D. 10% 9. What type of risk cannot be diversified away in a large portfolio? A. systematic risk B. firm-specific risk C. unsystematic risk D. unique risk