1. A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation of return of 25% while stock B has a standard deviation of return of 5%. Stock A comprises 20% of the portfolio while stock B comprises 80% of the portfolio. If the variance of return on the portfolio is .0080, the correlation coefficient between the returns on A and B is __________.
A. -.975
B. -.025
C. .025
D. .975
2. A newly issued 20-year zero coupon bond just sold for $311.05. What is the implicit interest rate on the bond?
A. 5.52%
B. 6.01%
C. 6.50%
D. 5.92%
E. 6.25%
Please explain answer