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a. 1. The T-bill's return does not depend on the state of the economy because the U.S. Treasury must redeem the bills regardless of the state of the economy. T-Bills are not entirely riskless. This is because T-bills are comprised of real risk-free rate and an inflation premium. If the rate of inflation is greater than realized return of the T-bill, then one would actually lose money investing in a T-bill.
2. High Tech's returns are expected to move with the economy most likely because the company's sales are affected by the economy itself—when the economy is doing well, sales increase, which increases profits, etc. All of this ultimately affects a stock's return. Collections is negatively correlated to High Tech, so it is assumed that Collections will perform in the opposite direction that High Tech does.

b. Expected Rate of Return
T-Bills: 5.5%
High Tech: 12.4%
Collections: 1.0%
U.S. Rubber: 9.8%
Market Portfolio: 10.5%......

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Approximate Pages: 5 (250 words per double-spaced page)

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