3. (15 points) Suppose that you compute betas for five securities: BA = 0.3, BB = 0.4, Bc = 1.2, Bp = 1.3, BE = 0.9. You also observe that return on the market portfolio is 8%, while risk-free rate is 2%. 1 (a) (3 points) Rank stocks by their systematic risk. Can you rank them by their total risk? (b) (6 points) Using CAPM, compute expected returns on the five securities. (c) (6 points) Suppose that you form a portfolio where each stock has the same weight of 15%, market portfolio has weight of 10%, and remaining is invested in risk-free security. Compute expected return, risk premium and beta of this portfolio