1. You believe that there is a 15% probability of a recession and 85% probability of a normal economy. If a fund is expected to earn -12% in a recession and 15% in a normal year, what is the standard deviation of returns for this fund?

A) 8.2%

b) 9.6%

c)10%

d)11.4%

e)13.2%

2. Banking institutions often require more collateral on a loan-to-value basis when making a loan to start up company

True or false

3. The basic financial metric typically used to determine whether an investment activity is, at least, minimally worth the risk of investment is the risk-free rate of return

True or false