Question 2: (20 points)

Dr. Poseidon, a young CEO of the Aris Bank holds a Master of Science in Finance degree with specialization in Corporate University from the Rinky-Dinky University. On December 7, 2019 Dr. Poseidon would deliver a lecture for the ZZZ Finance Association at the Banana State University. Please assist him/her to compute the following variables.

TIME R [WF] R [BOA] R [Market] Probability

2016 18% 35% 38% 0.25

2017 19 28 36 0.35

2018 26 29 34 0.25

2019 34 42 32 0.15

Assume that the Risk-Free Rate is 3%

1. Calculate the Expected Returns.

2. Calculate the Variances.

3. Calculate the Risks.

4. Calculate the Covariances.

5. Calculate the Betas and comment analytically.

4. Calculate the Sharpes ratio and comment analytically.

5. Calculate the Treynors ratio and comment analytically.
6. Draw the SML and the CML respectively.
7. Calculate the Coefficients of Variation.
8. Calculate the Correlation Coefficients.
9. Calculate using the CAPM Model the Returns for WF and BOA respectively.

COMMENT ON YOUR RESULTS ANALYTICALLY AND DRAW CAREFULLY THE NECESSARY DIAGRAMS