(a) Consider an economy that consists of only two risky stocks, A and B, plus a riskfree asset. Assume that the CAPM holds. Data on the two stocks is given in Table 2 below. The correlation between stocks A and B is 0.30 . Table 2 (i) Determine the market portfolio weights of stocks A and B. (4 marks) (ii) Compute the expected return and standard deviation of the market portfolio. (4 marks) (iii) Determine the CAPM beta of each stock. (4 marks) (iv) What is the risk-free rate in this economy? (4 marks) v) A nave investor wants to construct a portfolio that consists of the risk-free asset and stock B so that it has the same standard deviation as the market portfolio. What is the difference in expected return between this new portfolio and the market portfolio? Explain. (6 marks)