(a) (5 points) After examining years of data on hundreds of US equities, you discover the following relationship between the annual returns of 3 stocks, A,B, and C : RA=21RB+43RC2001. What should the effective annual risk-free interest rate be? Why? (Hint: Find a risk-free portfolio of A,B, and C.) (b) (5 points) Let R1 and R2 be the annual return of two equities, and let 1,2,12 and 22 be the mean and variance of the returns. Find a relationship between R1 and R2 if the returns are perfectly correlated. Determine the annual risk-free interest rate. (Hint: Recall that two random variables R1 and R2 are perfectly correlated if and only if R1=aR2+b, for some constants a>0 and b.) (a) (5 points) After examining years of data on hundreds of US equities, you discover the following relationship between the annual returns of 3 stocks, A,B, and C : RA=21RB+43RC2001. What should the effective annual risk-free interest rate be? Why? (Hint: Find a risk-free portfolio of A,B, and C.) (b) (5 points) Let R1 and R2 be the annual return of two equities, and let 1,2,12 and 22 be the mean and variance of the returns. Find a relationship between R1 and R2 if the returns are perfectly correlated. Determine the annual risk-free interest rate. (Hint: Recall that two random variables R1 and R2 are perfectly correlated if and only if R1=aR2+b, for some constants a>0 and b.)