1. Which of the following is the most diversified investment portfolio?
A) 100 shares of Wal-Mart stock, an IBM bond, and a two-year certificate of deposit
B) Municipal bonds issued by New York, Houston, and Chicago
C) One-year, five-year, and ten-year certificates of deposit
D) Equal amounts of stock in IBM, Intel, and Microsoft
2. The common stock of Tyler and Moore is expected to earn a 12.5 percent return next year. This stock has a risk premium of 8 percent. The inflation rate is projected at 3.5 percent. What is the expected rate of return on U.S. Treasury bills next year?
A. 4.0 percent
B. 4.2 percent
C. 4.3 percent
D. 4.5 percent
E. 4.8 percent