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

R_i=?_i+?_iR_M+e_i

whereR_iis the excess return for securityiandR_Mis the market's excess return. The risk-free rate is 2%. Suppose also that there are three securitiesA,B, andC, characterized by the following data:

Security	?i	E(Ri)	?(ei)
A	0.9	9%	22%
B	1.2	12	8
C	1.5	15	17

a.	If?M= 18%, calculate the variance of returns of securitiesA,B, andC.(Do not round intermediate calculations. Round your answers to the nearest whole number.)

	Variance
SecurityA
SecurityB
SecurityC

b.

Now assume that there are an infinite number of assets with return characteristics identical to those ofA,B, andC, respectively. What will be the mean and variance of excess returns for securitiesA,B, andC?(Enter the variance answers as a percent squared and mean as a percentage.Do not round intermediate calculations. Round your answers to the nearest whole number.Omit the "%" sign in your response.)

	Mean	Variance
SecurityA	%
SecurityB
SecurityC