QUESTION 22 5 points Save You manage a risky portfolio P that has the following characteristics: expected return -16% and the standard deviation of the return of your portfolio - 20%. The risk-free rate is at 4%. Your client wants to invest a proportion of her total investment budget in your risky portfolio to maximize expected return and at the same time limit the volatility to no higher than 14% on her overall portfolio. Then the proportion she should invest in your risky portfolio is A. 78% B. 65% C. 80% 0.75% . 70% QUESTION 3 5 points Assume that a security is fairly priced and has an expected rate of return of 0.16. The market expected rate of return is 0.10 and the risk-free rate is 0.04. The beta of the stock is A. 2.04. OB. 0.95 C. 1.33 D.2.00 E. 1.25. QUESTION 2 We run regressions of the excess returns of the two portfolios (Value and Growth) on the market excess return and obtain the following results. The numbers in brackets are the t-statistics. Portfolio Intercept MKT R-squared Value 0.048 (2.54) 0.95 (16.65) 0.86 Growth -0.012 (3.10) 1.11 (20.42) 0.91 What is the value premium after controlling for CAPM? A. 0.16 OB. 0.06 C. 0.036 D.0.064 E. 0.048