2. (A small world) Consider a world in which there are only two risky assets, A and B, and a risk-free asset F The two risky assets are in equal supply in the market; that is, M = (A+B) The following information is known: r = 10, 04, = == 002. and FM = 18 III

(a) Find a general expression (without substituting values) for

a, Ba, and Bu

(b) According to the CAPM, what are the numerical values of FA and F? 01,