1. Table 8.4 reproduces John's notes on Pioneer Gypsum and Global Mining. Calculate the expected return, risk premium, and standard deviation of a portfolio invested partly in the market and partly in Pioneer. (You can calculate the necessary inputs from the betas and standard deviations given in the table.) Does adding Pioneer to the market benchmark improve the Sharpe ratio? How much should John invest in Pioneer and how much in the market? (Show work that makes sense, or it will not be chosen)

TABLE 8.4

John's notes on Pioneer Gypsum and Global Mining.

	Pioneer Gypsum	/Global Mining
Expected return	11.0%	12.9%
Standard deviation	32%	24%
Beta	?.65	?1.22
Stock price	$87.50	$105.00

1. Repeat the analysis for Global Mining. What should John do in this case? Assume that Global accounts for .75% of the S&P index. (Assume a market standard deviation of 16%.)