1) Assume that the market has an expected return of 12% and volatility (standard deviation) of 20%

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1) Assume that the market has an expected return of 12% and volatility (standard deviation) of 20%. Company X has a 50% volatility (standard deviation). The correlation between the market and Company X is 90%. The risk-free rate is 3%. What would be the expected return on Company X?

1. 23%
2. 23,25%
3. 23,50%
4. 23,75%

2)Refer to Question 1 above. Suppose that you want to take only 15% risk (standard deviation) on your investment portfolio. What would be the return you can get if you invest in only Company X and the risk-free asset?

1. 9%
2. 9,025%
3. 9,050%