(c) Suppose now that the returns to the portfolios are given by single factor index model where: rit = ai+ Birm,+ + Ei,t where the covariance between cit and ejt is equal to zero. Notice that the covariances between portfolio i and j is then: cou( ri, rj ) = Bix Bj xom Assume that Bsmall-cap = 1.2 and Bvalue = 1. Using these assump- tions, update the covariance matrix you used above to account for this model. The diagonal elements of the matrix are not changed! Use the estimated variance of the market portfolio for om. With this modified covariance matrix calculate the implied weights on the MVE portfolio using "eff3.xls" again. Have the weights changed from part 2c? If so how? (d) Continuing to assume that BSmall-cap = 1.2, Bvalue = 1 and rf = 2% what are the estimated alpha's for the small-cap and value portfolios