1) Two Stocks and the S&P 500 have the following data based on the period 1995-1999: Variance(Stock A) Variance(S&P)- Covariance (Stock B, S&P) Beta (Stock A) 3.2 1.5 2.3 = 0.8 Variance(Stock B) Covariance(Stock A, S&P) Covariance (Stock A, Stock B)= Beta (Stock B)- 1.1 1.2 1.2 1.5 a) Compute the correlation coefficients between stocks A and B and its meaning? (15 Pts) b) You expect the riskfree rate to be 4% and the market return to be 10%. Compute the required return for stocks A and B? Plot the SML. (10 pts) or overvalued? Compute alpha and explain? (15 pts) portfolio consisting of the two stocks. (15 Pts) c) The expected return for Stock A and Stock B are both 10%. Are Stocks A and B undervalued d) You invest $400,000 in Stock A and $600,000 in B, compute the standard deviation for a