1. Suppose you have a portfolio that is 70% in the risk-free asset and 30% in a stock. The stock has a standard deviation of 0.30 (i.e., 30%). What is the standard deviation of the portfolio?
A. 0.30 (i.e., 30%)
B. 0.09 (i.e., 9%)
C. 0.21 (i.e., 21%)
D. 0
2. You have a total of $100,000 to invest in a portfolio of assets. The portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a Treasury bill with a rate of return of 5%. How much money should be invested in the risky asset to form a portfolio with an expected return of 11%?
A. $60,000
B. $40,000
C. $70,000
D. $30,000
3. Consider the CAPM. The risk-free rate is 4%, and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.2?
A. 6%
B. 15.6%
C. 18%
D. 20.8%