1. Use the following information to answer the questions.

Security	Beta	Standard Deviation	Expected return
S&P 500 Risk-free security Stock D Stock E Stock F	1.0 0.0 ( ) 0.8 ( )	20% 0% 30% 15% 25%	10.0% 4.0% 13.0% ( )% ( )%

1. Figure out a beta for Stock D and an expected return for Stock E using the CAPM equation.
2. If Stock F has a correlation with S&P 500 of 0.6 while the standard deviation of Stock F is 25% and the standard deviation of S&P is 20%. Figure out a beta for Stock F.
3. You form a complete portfolio by investing $8,000 in S&P 500 and $2,000 in the risk-free security. Given the information about S&P 500 and the risk-free security on the table, figure out an expected return, a standard deviation, and a beta for the complete portfolio.

Variance-Covariance matrix
	Stock H	Stock I	Stock J
Stock H	0.0169
Stock I	0.0026	0.0400
Stock J	0.0156	0.0090	0.0225

2. Use the following information to answer the questions.

You form two portfolios. You form Portfolio A by investing $2,000 in Stock H and $8,000 in Stock I while you form Portfolio B by investing $4,000 in Stock I and $6,000 in Stock J.

1.Figure out the variance for Portfolios A and B.

2.Given the risk free rate of 0.04, figure out the Sharpe ratio for Portfolios A and B. Which portfolio is better based on the Sharpe ratio?

Given expected returns of 0.06, 0.10, and 0.12 for Stocks H, I, and J respectively, Figure out the expected return for Portfolios A and B.

Sharpe ratio:

sp=Erp-rf/op