4. Assume that security returns are generated by the single-index model, R = a; + BRM + e, where R is the excess return for security i and Ry is the market's excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security B: E(R)0(e) A 0.8 10% 25% B 1.0 12 10 C 1.2 14 20 I 1. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. If one forms a well- diversified portfolio of type A securities, what will be the mean and variance of the portfolio's excess returns? What about portfolios composed only of type B or C stocks? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.) 2. Is there an arbitrage opportunity in this market