1. Suppose you are a money manager of a $5 million investment fund. The fund is invested in four funds with the following investments and betas: a. If the market expected rate of return is 9.0% and the risk free rate (T-bill return) is 4%, what is the fund's expected rate of return? b. Stock D is considered too risky. You decide to sell it at its posted value and invest the proceeds T-bills. Find the new fund's expected rate of return. 2. Use stock A and B in question 1 to create one portfolio with a beta of 1.10. A second portfolio with a beta of 1.80. For each such portfolio, show the weight, how will you allocate the portfolio $5 million, and how many shares will be purchased or shorted. 3. Use the information in question 1. There is a fund E with a beta of 1.20 and expected return of 12%. Using any combination of stock and T-bill, is there an arbitrage opportunity, and if there is, show how to exploit it with a base $1 million transaction (that is show exact number of stocks to trade)