5. Your analyst collects data on two large, well-diversified stock funds, Fund 1 and Fund 2. Each fund has a share price of $1. Let R, be the return on Fund 1, and let R2 be the return on Fund 2. Fund 1 and Fund 2 both have a beta of 1.2. and the two funds have returns of Ri= 6% +1.2(RM-Re) + Vi and R2 = 4% + 1.2(RM-Re) + V2 where (RM-Re) is the excess return on the market, and vi and v2 are random variables with mean zero (E[VI] E[V2] = 0). Suppose that Rx -4%. a. Derive the expected returns of both funds. b. Compute the alpha of Fund 1 and the alpha of Fund 2. c. Propose a strategy to make money on average without an initial net expenditure of funds (the strategy is self-financing). Show that your strategy makes money on average