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1. Your portfolio consists of two stocks. You have $2000 in stock A and $8000 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.6. What is your portfolio standard deviation?
a. 9.8%
b. 11.2%
c. 6.8%
d. 10.2%
e. 10.9%
2. If investors require a 5.5% nominal return and the expected inflation rate is 2%, what is the expected real return?
a. 3.88%
b. 3.04%
c. 3.43%
d. 2.21%
e. 2.94%
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