1. You have developed the following data on three stocks: Stock A has a standard deviation of .15 and a Beta of .79. Stock B has a standard deviation of .25 and a Beta of .61. Stock C has a standard deviation of .20 and a Beta of 1.29. If you are a risk minimizer, you should choose Stock _____ if it is to be held in isolation and Stock _____ if it is to be held as part of a well-diversified portfolio. Please select from: A, A A, B B, B C, A C, B.
2. Should you borrow $1,000 at 5% to purchase a machine that will last two years. Each year the machine will earn $260 dollars. At the end of the two years you can sell the machine for $500. Show your work and explain.