(a) Describe the relationship represented by the security market line. The table below presents two fully diversified stock portfolios. Explain why you agree or disagree with the following statement: Since the standard deviation of each stock in stock portfolio A is higher, stock portfolio A offers a higher expected return under CAPM than stock portfolio B". Stock portfolio A Stock portfolio B Beta of the portfolio 12 12 High Low Standard deviation for each stock in the portfolio (6 marks) (b) Lincoln Corporation has accumulated a large amount of cash flow. The CEO proposes to fly all managers to a luxury resort in Hawaii at the end of the year for a one-week holiday using the corporate jet. Describe how the company's capital structure could be changed to prevent managers from spending the company's cash on the luxury holiday, but instead investing the cash in positive NPV projects. Explain why the proposed change to capital structure could help encourage investment in positive NPV projects. (6 marks) ITotalmarken GI-12Merkel