CAPM describes risk-return relation as a straight line in x-y axis (x for risk, y for return). Now in the following chart, you are asked to locate the straight line.

From real-world data, mean returns and standard deviations of returns of four stocks are collected for you as (x, y) points: GOOG (9.1%, 2.0%) TIF (10.1%, 1.2%) AMZN (11.5%, 2.7%) MCD (4.6%, 1.1%) Assume these four stocks obey CAPM; Risk-free rate is known 0.2% (monthly rate). 1) Can you locate the straight line with the given information? Find the slope and the intercept of the straight line. 2) If additionally, you know the systematic risk of GOOG is 7.2% (measured in standard deviation), locate the straight line by finding its slope and intercept. 3) Recall the slope is also the return-to-risk ratio, which is the same for each individual stock. Can you find the systematic risk of TIF, AMZN and MCD? 4) For the four provided points: GOOG(9.1%, 2.0%) TIF(10.1%, 1.2%) AMZN(11.5% 2.7%) MCD(4.6%, 1.1%), is the straight line to the left of them, to the right of them or going through them? 5) Now you can see why the four provided points (could generalize to more points as seen in the chart) are not on an exact straight line. Is it a violation of CAPM? Very briefly explain. 6) What is the bullet-shaped curve? Very briefly explain.