2. The risk free rate is 5%, and the expected return on the market is 8 %. The beta of Stock 1 is 1.2 while the beta of Stock 2 is 1.6. i) What is the equity cost of capital for Stock I according to the CAPM? ii) What is the equity cost of capital for Stock 2 according to the CAPM? b. A portfolio consists of 30% of Stock 1 and 70% of Stock 2 a. i) Estimate the mean return of the portfolio using your answers for part (a). ii) Estimate the beta of the portfolio using the weights of the portfolio. ii) Estimate the required return on the portfolio using the beta you derived in part (ii). Comment c. According to an analyst, the actual expected return of Stock 3 is 6.0% and its beta is 0.7. Portfolio Manager: "Stock 3 represents a buying opportunity. Our fund should purchase this stock." Evaluate