1. Stocks A and B each have an expected return of 12%, a beta of 1.2, and a standard deviation of 25%. The returns on the two stocks are negatively correlated. Portfolio P has 50% in Stock A and 50% in Stock B. Which of the following statements is CORRECT?

a. Portfolio P has a beta that is greater than 1.2.

b. Portfolio P has a standard deviation that is greater than 25%.

c. Portfolio P has a coefficient of variation that is less than 2.1.

d. Portfolio P has an expected return that is less than 12%.

e. Portfolio P has an expected return that is greater than 12%.

1. If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the smallest percentage increase in its value?

a.	A 10-year zero-coupon bond.
b.	A 10-year bond with a 10 percent semiannual coupon.
c.	A 10-year bond with a 10 percent annual coupon.
d.	A 5-year zero-coupon bond.
e.	A 5-year bond with a 12 percent annual coupon.