2. Stock X has a beta of 1.5 and cost of capital of 15% estimated by CAPM. If we want to estimate X's return volatility based on its past returns, which distribution should we follow sample distribution or population distribution? b. Suppose there is another stock Y whose beta is 0.7 and estimated cost of capital of 10%. What is the expected market return and risk-free rate by assumption? c. Take 15% as expected return of X and 10% as expected return of Y. Suppose their volatility are each 5% and 4% and return correlation is 0.4. What is the expected return and volatility (i.e. standard deviation) of a portfolio that holds 50% of X and 50% of Y? d. Draw the efficient frontier line for a portfolio that holds X and Y, and mark three allocations on the line: 100% invested in X, 100% invested in Y, and 50% in Y that you have calculated in part (c). Remind that the line represents the volatility (horizontal axis) and return (vertical axis) for each possible allocation