1. Consider two stocks A and B and a market index M with the following rates of return (%): Month 1 2 3 A 3.25 3 2 B 2.25 3.5 1.5 M 2 1.5 1 The matrix of variances and covariances is given below (%): Month A B M A 29.17 29.17 20.83 B 29.17 68.06 12.50 M 20.83 12.50 16.67 a. Construct the minimum risk portfolio of stocks A and B. What is the risk and the return on this portfolio? b. Knowing that Rf-0.5% compute the returns at equilibrium at decide whether the stocks are over or undervalued. c. Write the CML equation. Construct an efficient portfolio with a return of 2% d. Construct an equally weighted portfolio of A and B. Compute Treynor's, Sharpe's and Jensen's performance measures