Stock A; = 1.75

Stock B; = 1.55

Stock C; = 1.33

Expected return for the equity market = 8%

Current yield on short term US Government Debt = 2.43%

1. Using SML/CAPM, where should you expect the highest return?

A. Stock A

B. Stock B

C. Stock C

D. the equity market

2. A portfolio made up of 60% short term US Government Debt, 20% Stock A and 20% stock B would have a equal to;

A. 1.75

B. 1.65

C. 1.55

D. 0.66

E. 0.00