QUESTION 3

1. If the risk-free rate is 4 percent and the market price of total risk required by investors is 0.05% for each dollar of standard deviation, what is the required rate of return from an investment with a standard deviation equal to $200?

   	a.	4.05%.
   	b.	10%.
   	c.	14%.
   	d.	4%.

QUESTION 4

1. If an investor combines two securities that are perfectly positively correlated, the risk of the resulting portfolio will be:

   	a.	Greater than the risk of either security.
   	b.	Less than the risk of either security.
   	c.	Less than it would be if the stocks were not perfectly positively correlated.
   	d.	The same as the risk of either security.