Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%. Monsters Inc. has a 24%...

1.

Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%. Monsters Inc. has a 24% volatility and a correlation with the market of .60, while California Gold Mining has a 32% volatility and a correlation with the market of -.7. Assume the CAPM assumptions hold.

California Gold Mining's required return is closest to:

13%

5%

15%

-5%

2.

Tom's portfolio consists solely of an investment in Merck stock. Merck has an expected return of 13% and a volatility of 25%. The market portfolio has an expected return of 12% and a volatility of 18%. The risk-free rate is 4%. Assume that the CAPM assumptions hold in the market.

Assuming that Tom wants to maintain the current expected return on his portfolio, then the minimum volatility that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:

18%

20%

22%

25%

3.

An equally weighted portfolio consists of 20 assets which all have a standard deviation of 0.143. The average covariance between the assets is 0.154. Compute the standard deviation of this portfolio. Please enter your answer as a percentage to three decimal places (i.e. 12.345% rather than 0.12345 -- the percent sign is optional).