1. Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 9%, and all stocks have independent firm-specific components with a standard deviation of 49%. Portfolios A and B are both well-diversified with the following properties:
2. ABC Enterprises issued a bond having a par value of $1,000, a 7 year life and:a 12% coupon rate. If interest is paid semiannually and investors require a 14% rate of return, what is the value of the bond?