1. Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?

a. 9.8%

b. 11.2%

c. 6.8%

d. 10.2%

e. 10.9%

2. If investors require a 5.5% nominal return and the expected inflation rate is 2%, what is the expected real return?

a. 3.88%

b. 3.04%

c. 3.43%

d. 2.21%

e. 2.94%