The 3M spot rate is 6% and the 6M spot rate is 5%. As a firm believer in pure expectation yield curve theory, which statement best reflects your beliefs about the 3M rate that will apply in 3 months time? and why?
a) less than 5%
b) between 5 and 6%
c) greater than 6%
d) depends on my own expectation
2. Which one of the following stocks will have the highest expected return?
Stock A, B, C, D, E
Standard deviation 32%, 46%, 67%, 38%, 41%
Beta .8, 1.1, .9, 1.2, 1.3
A. Stock A.
B. Stock B.
C. Stock C.
D. Stock D.
E. Stock E.