1. Suppose you own a portfolio with two securities. Security A has an expected return of 13.4% and a standard deviation of 48% per year. Security B has an expected return of 9.3% and a standard deviation of 44% per year. Considering that your portfolio is composed of 35% of Security A and 65% of Security B, and that the correlation between their returns is .25, what is the standard deviation of your portfolio?

a. 45.40%

b. 8.53%

c. 8.44%

d. 36.61%

e. 13.40%

2. Suppose a particular stock has a beta of 1.13. The risk-free rate of return is 7.5% and the expected rate of return on the market is 15.7%. What is the expected rate of return on this stock according to the CAPM?

a. 33.72%

b. 9.27%

c. 25.24%

d. 16.77%

e. 8.20%