Question 1. In a CAPM world, is the following scenario possible? Explain why or why not.

Question 1. In a CAPM world, is the following scenario possible? Explain why or why not. Portfolio Expected Return Std. Dev. Risk-free 1% 0 Market 5% 10% Stock A 9% 45% Cov(A,M) 10% Question 2. Consider two treasury bonds with a par value of $500 each. The first one is a one year bond and pays no coupons. It is selling for a price of $475. The second one is a two year bond and pays coupons of 5 percent. It is selling for a price of $500. (a) What is the yield-to-maturity of each? (b) What is the implied forward rate? (c) Is the yield curve (as constructed with these two assets) upward sloping, downward sloping, or flat? Question 1. In a CAPM world, is the following scenario possible? Explain why or why not. Portfolio Expected Return Std. Dev. Risk-free 1% 0 Market 5% 10% Stock A 9% 45% Cov(A,M) 10% Question 2. Consider two treasury bonds with a par value of $500 each. The first one is a one year bond and pays no coupons. It is selling for a price of $475. The second one is a two year bond and pays coupons of 5 percent. It is selling for a price of $500. (a) What is the yield-to-maturity of each? (b) What is the implied forward rate? (c) Is the yield curve (as constructed with these two assets) upward sloping, downward sloping, or flat