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Question Two a. Consider a world with only two risky assets, ( A ) and ( B ), and a risk-free asset. Stock ( A ) has 200 shares outstanding, a price per share of ( $ 4.00 ), an expected return of ( 17 % ) and a volatility of ( 30 % ). Stock B has 300 shares outstanding, a price per share of ( $ 4.00 ), an expected return of ( 10 % ) and a volatility of ( 15 % ). The correlation coefficient ( ho A B=0.4 ). Assume CAPM holds. i. What is the expected return of the market portfolio? (4 Marks) ii. What is the volatility of the market portfolio? (5 Marks) iii. What is the beta of stock A? (2 Marks)

          Question Two
a. Consider a world with only two risky assets, ( A ) and ( B ), and a risk-free asset. Stock ( A ) has 200 shares outstanding, a price per share of ( $ 4.00 ), an expected return of ( 17 % ) and a volatility of ( 30 % ). Stock B has 300 shares outstanding, a price per share of ( $ 4.00 ), an expected return of ( 10 % ) and a volatility of ( 15 % ). The correlation coefficient ( 
ho A B=0.4 ). Assume CAPM holds.
i. What is the expected return of the market portfolio? (4 Marks)
ii. What is the volatility of the market portfolio? (5 Marks)
iii. What is the beta of stock A? (2 Marks)

Question Two
a. Consider a world with only two risky assets, ( A ) and ( B ), and a risk-free asset. Stock ( A ) has 200 shares outstanding, a price per share of ( 4.00 ), an expected return of ( 17 % ) and a volatility of ( 30 % ). Stock B has 300 shares outstanding, a price per share of ( $ 4.00 ), an expected return of ( 10 % ) and a volatility of ( 15 % ). The correlation coefficient (
ho A B=0.4 ). Assume CAPM holds.
i. What is the expected return of the market portfolio? (4 Marks)
ii. What is the volatility of the market portfolio? (5 Marks)
iii. What is the beta of stock A? (2 Marks)

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