1.Assume the expected market return is 9%, the market variance is 0.025, and the T-Bill rate is 3%. For a portfolio with the following weights: 70% in AAPL, 15% in MMM, 15% in XOM. Form a zero-beta portfolio and report the weights in the active and passive portfolios as well as the alpha for the zero-beta portfolio.

Return

Beta

Variance (Return)

Variance (Residual)

AAPL

0.14

1.4

0.080

MMM

0.10

1.1

0.055

XOM

0.09

0.9

0.025