You own a portfolio comprised of two securities, A and B. You have the following expectations:

Expected Annual Return of A = 8.00%

Expected Annual Return of B = 26.00%

Standard Deviation of Annual Returns of A = 16.00%

Standard Deviation of Annual Returns of B = 24.00%

Correlation (A,B) = -0.80000

Covariance (A,B) = -0.03072

1. The weights of A and B in the expected minimum variance portfolio are closest to:

B. 61% A, 39% B

D. 100% A, 0% B

C. 51% A, 49% B

A. 31% A, 69% B

2. When Jensen's alpha is zero, portfolio return performance is__________the theoretical return expectation derived from the CAPM.

C. equal to

D. none of the above

B. less than

A. better than

3. The geometric mean return is the appropriate measure of the__________ rate of return earned on an investment over time.

C. compound

D. expected

A. simple average

B. required