Consider the following information for three stocks, a, b, and c. the stocks' returns are positively but not perfectly positively correlated with one another, i. e., the correlations are all between 0 and 1.expected standardstock return deviation betaa 10% 20% 1.0b 10% 10% 1.0c 12% 12% 1.4portfolio ab has half of its funds invested in stock a and half in stock b. portfolio abc has one third of its funds invested in each of the three stocks. the risk-free rate is 5%, and the market is in equilibrium, so required returns equal expected returns. which of the following statements is correct? a. portfolio ab's coefficient of variation is greater than 2.0.b. portfolio ab's required return is greater than the required return on stock a. c. portfolio abc's expected return is 10.7%.d. portfolio abc has a standard deviation of 20%.e. portfolio ab has a standard deviation of 20%.

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?