Which one of these statements correctly reflects historical history from 1926 through 2012?

The rate of inflation as measured by the consumer price index has been positive every single year.

The return on U.S. Treasury bills has exceeded the rate of inflation every single year.

In 2012, the rate of inflation was slightly higher than the average inflation rate for the period of 1926 through 2012.

U.S. Treasury bills have had a positive rate of return every single year.

Large-company stocks have never returned more than 40 percent in a single year.

For the period 1926-2012 small-company stocks had an average return of 16.5 percent. U.S. Treasury bills returned 3.6 percent and inflation averaged 3.1 percent. Small-company stocks had an approximate real rate of return of _____ percent and a risk premium of _____ percent.

12.9; 13.4

9.8; 12.9

13.4; 12.9

13.4; 9.8

12.9; 9.8

Assume inflation averaged 3.2 percent during a period in which U.S. Treasury bills earned 4.3 percent. What was the average real rate of return on large-company stocks if the risk premium on those stocks was 7.4 percent for the period?

8.5%

3.2%

14.9%

.1%

7.5%

A portfolio contains four assets. Asset 1 has a beta of .7 and represents 35 percent of the portfolio. Asset 2 has a beta of 1.3 and represents 20 percent of the portfolio. Asset 3 has a beta of 1.1 and is 25 percent of the portfolio. Asset 4 has a beta of 2.16. What is the portfolio beta?

1.642

1.308

1.480

1.264

1.212

You want your portfolio beta to be 1.3. Currently, the portfolio consists of $100 invested in stock A with a beta of 1.5 and $300 in stock B with a beta of .8. You have another $400 to invest and want to divide it between an asset with a beta of 1.7 and a risk-free asset. How much should you invest in the risk-free asset?

$200.15

$50.25

$400.00

$17.65

$382.35