Q. 1) Two stocks are available. The corresponding expected rates of return are r1 also r2; the corresponding variances also covariance's are σ12, σ22 also σ12. Illustrate what percentages of total investment should be invested in each of the two stocks to minimize the total variance of the rate of return of the resulting portfolio? Illustrate what is the mean rate of return of this portfolio?

2)1. Dell Computers has an outstanding matter of bond with a par value of $1,000, paying 8 percent coupon rate. The bond has 10 yrs to maturity.

(A) Illustrate what is the value of the bond assuming 7percent (%) required rate of return?

(B) If Dell Computers bond paid interest semiannually, Elucidate how much should the bond sell?

(C) Assume the bond is currently selling for $898.55, Illustrate what is the bond's YTM? (Yield to maturity)

2. Target Company paid $1.00 per share in common stock dividends last yr. The dividends of the company are expected to grow at a 5percent (%) rate in the next three yrs. After three yrs, the dividend is expected to grow at a constant growth of 7percent (%) indefinitely. Illustrate what is the value of Target's common stock? Stockholders require a return of 10percent (%) to invest in Target's common stock.