1. A portfolio consists of Securities A and B in the proportions of 0.7 and 0.3. Security A has a random error standard deviation of 7%; Security B at 11%. The portfolio beta is 1.2, and the market standard deviation is 10%. The total portfolio variance is
(a) 158. (b) 204. (c) 265. (d) 179. (e) 137.
2. When using the market model for portfolio development, the analyst assumes that the correlation between each security's random error is
(a) 0.5. (b) 0.0. (c) -0.5. (d) -1.0. (e) 1.0.