Question 1 (5 points) An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock Bhas an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is 4. The risk-free rate of return is 5%. The expected return on the optimal risky portfolio is approximately (Hint: Find weights first.) 14% 16% 18% 19% question 21 points) Asset A has an expected return of 15% and a Sharpe ratio of A Asset B has an expected return of 20% and a Sharpe ratio of 3. A risk-averse investor would prefer a portfolio using the risk-free asset and asset A asset B no risky asset The answer cannot be determined from the data given. You run a regression for a stock's return on a market Index and find the following Excel output Multiple R 0.35 R-Square 0.12 Adjusted R-Square 0.02 Standard Error 38.45 Observations 12 Coefficients Standard Error t-Stat p-Value Intercept 4.05 15.44 0.26 0.80 Market 1.32 0.97 1.36 0.10 Roarket The security characteristic line for this stock is Rstock-_- .35;.12 4.05; 1.32 15.44.97 26; 1.36