a- Consider two risky assets. The first one is the stock of Microsoft. The second one itself is a portfolio of Small Firms. The following moments characterize the joint return distribution of these two assets. E[rSmall]=1.912 E[rMsft]=3.126 [rSmall]=3.711 [rMsft]=8.203, cov(rMsft,rSmall)=12.030 What is the standard deviation and expected return of a portfolio formed with 60% invested in the small firm asset and 40% in Microsoft? (3p) b. Your investment portfolio consists of $25,000 invested in only one stock, Apple. Suppose the risk-free rate is 4%, Apple stock has an expected return of 14% and a volatility of 35%, and the market portfolio has an expected return of 10% and a volatility of 18%. Under the CAPM assumptions, what alternative investment has the lowest possible volatility while having the same expected return as Apple? What is the volatility of this investment? (3p)