Question 1 (10 points) Suppose you create a 2-asset portfolio with the following stocks. Stock Romeo: 10% weight, standard deviation = 10% Stock Juliet: 90% weight, standard deviation = 30% Correlation coefficient between Romeo & Juliet = +0.20 Use this information to determine the 2-asset portfolio's standard deviation. Show all work. wse & (0)2 + ( ) & 655). (M) & 605 + 2? Ws" Wb 0:10 * 0.10) + (0.80 x 0.30) + 2x 0.10x 0.50 x6.20 0.100.10) when 1 the Question 2 (12 points) Suppose you believe that WalMart's stock price will decrease. You decide to speculate by considering these 2 strategies. Both option strategies have the same exercise price, same expiration date. Current stock price exercise price. You currently do not own any shares of Walmart. Strategy # 1: Hold (buy) a WalMart put option Strategy #2: Write (sell) a Walmart call option A. Briefly discuss the advantages of using Strategy #1 over Strategy #2. B. Briefly discuss the advantages of using Strategy #2 over Strategy # 1. APng the well mal when then the price usums to decreshe is weit sor the poice o en decress then buy thriller because sue of you san prult Bell knowing the wall the webcam fenesu w deresse de ground a la le (yon Sur Suppose a common stock currently pays annual dividends of $7.50 per share. You forecast the dividend per share to grow at 5.0% per year for the next 4 years, followed by 2,0% per year growth forever. Required (expected) stockholders rate of return is 12.0%. Calculate the intrinsic value for this common stock. Show all work. Year 1: 7.50x (1 tous) - 17.875 7.875+ (1+0.05) $8.26875 8. 268784(1+0.05) 18.6821875 8. 6821875 (1 +0.05) - 19.11629 Years: 9. 11625 & (1+0.02) & 9.256 n. = 4,1288627 o " 0.12 - 0.02 You 2 5 Yer B You 4 PV (9790/(1+0.010) 188.6516