QUESTION 7 Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%. Monsters Inc. has a 24% volatility and a corelation with the market of 60, while California Gold Mining has a 32% volatility and a correlation with the market of-7. Assume the CAPM assumptions hold. Monsters' required return is closest to: 11.5% 13.0% 15.5% 10.096 QUESTION 8 Which of the following statements is FALSE? If we increase the fraction invested in the efficient portfolio beyond 100% we are short selling the risk-free investment. As we increase the fraction invested in the efficient portfolio, we increase our risk premium but not our risk proportionately. Every investor should invest in the tangent portfolio independent of his or her taste for risk. To eam the highest possible expected return for any level of volatility we must find the portfolio that generates the steepest possible line when combined with the risk-free investment. QUESTION 9 Your investment portfolio consists of $10,000 worth of Google stock. Suppose that the risk-free rate is 496, Google stock has an expected return of 14% and a volatility of 35%, and the market portfolio has an expected return of 10% and a volatility of 18%. Assume that the CAPM assumptions hold. The volatility of the alternative investment that has the lowest possible volatility while having the same expected return as Google is closest to: 10.8% 30.0% 18.0% 35.0% QUESTION 10 An equally weighted portfolio consists of 28 assets which all have a standard deviation of 0.316. The average covariance between the assets is 0.097. Compute the standard deviation of this portfolio. Please enter your answer as a percentage to three decimal places (i.e. 12.345% rather than 0.1 2345-the percent sign is optional)