1. A one year Treasure bill has a yield of 5%. A bond will pay $40 at the end of year one and $1,040 at the end of year 2. If its market value is $946.50, the two-year spot rate is:
(a) 9%. (b) 5%. (c) 7%. (d) 6%. (e) 8%.
2. Your portfolio has three stocks, A, B, and C, in the proportions of .2, .3, .5. The Betas for the individual stocks are A at 1.2, B at 1.0, and C at .7. Beta of your portfolio is:
(a) 1.00. (b) 1.02. (c) 0.94. (d) 1.09. (e) 0.89.