A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, are

A. the line that connects the risk-free rate and the global minimum-variance portfolio of the risky securities.

B. the horizontal line drawn from the risk-free rate.

C. the line tangent to the efficient frontier of risky securities drawn from the risk-free rate.

D. the line that connects the risk-free rate and the portfolio of the risky securities that has the highest expected return on the efficient frontier.

E. the line that connects the risk-free rate and the global maximum-variance portfolio of the risky securities.

A. Only portfolio D cannot lie on the efficient frontier.

B. Only portfolio A cannot lie on the efficient frontier.

C. Cannot tell from the information given.

D. Only portfolio B cannot lie on the efficient frontier.

E. Only portfolio C cannot lie on the efficient frontier.

A. 8.3%.

B. 1.7%

C. -1.7%.

D. -5.5%.

E. 5.5%

A. 6.00%

B. 8.33%

C. 12.00%

D. 60.00%

E. None of these is correct.

A. unique risk, market risk.

B. unique risk, firm-specific risk.

C. systematic risk, market risk.

D. systematic risk, unique risk.

E. systematic risk, firm-specific risk

A. is the sum of the securities' returns.

B. is both a weighted average of the securities' returns and a weighted sum of the securities' variances and covariances.

C. is the weighted sum of the securities' variances and covariances.

D. is a weighted average of the securities' returns.

E. is the weighted sum of the securities' covariances

A. None of these is correct.

B. \$729

C. \$870

D. \$1,000

E. \$810