Assume that the capital market is in equilibrium, the risk free rate is 2, and the return on the market is 12. You want to construct a portfolio on the SML with an expected return of 16. What are the portfolio weights?
A) -0.4, 1.4
B) -0.1, 1.1
C) 0.2, 0.8
D) 0.4, 0.6
E) 0.4, -1.4
Question 2
Rose bought a share of stock for 64.50 that paid a dividend of .50 and sold nine months later for 64.00. What was her dollar profit or loss and holding period return?
A) 0.50, 0.78
B) -0.50, -0.78
C) 0.00, 0.00
D) There is no correct solution to this question.
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