Question $7$

You form a portfolio by buying $$14983$of Microsoft stock, and $$84329$of Apple stock. Microsoft stock has a standard deviation of

$27\%$and Apple stock has a standard deviation of $34\%,$and they have a correlation of $0\mathrm{.}45.$

$$What is the standard deviation of your portfolio?

Please give your answers to two decimal places

$(9\mathrm{.}99\%)$

$$

Question $8$

If we take a portfolio of average stocks and diversify away all the risk we can, we would expect to still have a volatility

$($Standard Deviation$)$ of:

$$

$30\%$

$$

$20\%$

$$

$40\%$

$$

$10\%$

Question $9$

In a reasonably efficient market, if a stock has a beta of

$0\mathrm{.}7$we expect that it will have $(\_\_)$ exposure to market risk and $(\_\_)$expected returns.

$$

Average, Average

$$

Above Average, Above Average

$$

Below Average, Above Average

$$

Above Average, Below Average

$$

Below Average, Below Average

Question $10$

You form a portfolio by buying $$78812$ of American Airlines stock, and $

$86584$of Southwest stock. If American Airlines stock has an expected return of

$10\mathrm{.}6\%$ and Southwest stock has an expected return of $11\%,$what is the expected return of your portfolio?

Please give your answers to two decimal places

$(9\mathrm{.}99\%)$