1. Using the following returns, calculate the average returns, the variance, standard deviations and coefficient of variation for X and Y.

Yr	Rx	Ry
1	6.5	11.25
2	-3.25	0
3	11.75	15.5

2. Using the following returns, calculate the expected returns, the variance, standard deviations and coefficient of variation for X and Y.

Prob	Rx	Ry
0.25	6.5	11.25
0.5	-3.25	0
0.25	11.75	15.5

3. You have been given the expected return data shown in the first table on three assetsF, G, and Hover the period 2015-2018

Year	Asset F	Asset G	Asset H
2015	9	12	15
2016	8	9	16
2017	5	21	19
2018	13	6	11

Using these assets, you have isolated the three investment alternatives shown in the following table.

Alternative	Investment
1	100% of asset F
2	25% of asset F and 75% of asset G
3	50% of asset F and 50% of asset H

1. Calculate the expected return over the 4-year period for each of the three alternative
2. Calculate the standard deviation of returns over the 4-year period for each of the three alternatives.
3. Use your findings in parts a and b to calculate the coefficient of variation for each of the three alternatives.
4. On the basis of your findings, which of the three investment alternatives do you recommend? Why?

4. A stock has a beta of .75, the expected return on the market is 11 percent, and the risk-free rate is 4 percent.

a. What must the expected return on this stock be?

b. Draw the Security Market Line (SML) -be sure to label all relevant points-

c. Suppose the risk free rate falls to 3%. What is the expected return on this stock? Redraw the SML. How has the shape of the curve changed?

d. Suppose the expected return on the market is now 14 percent and the risk free rate is 4%. What is the expected return on his stock? Redraw the SML. How has the shape changed from the first graph you created?