4. Assume that we have only two following risk assets(stock 1 and 2) in the market. E(r) or) stock 1 20% 20% stock 2 10% 20% The correlation coefficient between stock 1 and 2 is zero(0) and the risk-free asset is 5%. In the equilibrium (i.e., when the prices are properly set or arbitrage transactions are not possible), the market capitalization of stock 1 and 2 are $3 million and $1 million respectably.. a What is the Sharpe ratio (E[Rm]=Rf) of the market portfolio?. 1 b Other things being equal, describe what happens to the above Sharpe ratio increases or de- creases?) if the correlation coefficient between stock 1 and 2 is increased? Explain graphically. (use mean-standard deviation plane) c Other things being equal, describe what happens to the above Sharpe ratio increases or decreases?) if the risk-free asset is 6% (increased by 1%)? Explain graphically. (use mean- standard deviation plane) 4. Assume that we have only two following risk assets(stock 1 and 2) in the market. E(r) or) stock 1 20% 20% stock 2 10% 20% The correlation coefficient between stock 1 and 2 is zero(0) and the risk-free asset is 5%. In the equilibrium (i.e., when the prices are properly set or arbitrage transactions are not possible), the market capitalization of stock 1 and 2 are $3 million and $1 million respectably.. a What is the Sharpe ratio (E[Rm]=Rf) of the market portfolio?. 1 b Other things being equal, describe what happens to the above Sharpe ratio increases or de- creases?) if the correlation coefficient between stock 1 and 2 is increased? Explain graphically. (use mean-standard deviation plane) c Other things being equal, describe what happens to the above Sharpe ratio increases or decreases?) if the risk-free asset is 6% (increased by 1%)? Explain graphically. (use mean- standard deviation plane)