Assume that security returns are generated by the single$-$index model,

$R_i={}_i+{}_i{R}_M+e_i$

where $R_i$ is the excess return for security i and $R_M$ is the market's excess return. The risk$-$free rate is $2\%.$ Suppose also that there are

three securities $A,B,$ and $C,$ characterized by the following data:

Required:

a$.$ If ${}_M=20\%,$ calculate the variance of returns of securities $A,B,$ and $C.$

b$.$ Now assume that there are an infinite number of assets with return characteristics identical to those of $A,B,$ and $C,$ respectively.

What will be the mean and variance of excess returns for securities $A,B,$ and $C?$

Complete this question by entering your answers in the tabs below.

Required $A$

If ${}_M=20\%,$ calculate the variance of returns of securities $A,B,$ and $C.$

Note: Do not round intermediate calculations. Round your answers to the nearest whole number.