Case study 1: CAPM, CML and APT Alpha Fund manager is considering new stock selection analysis as follows: E(R) B Stock A Stock B Stock C NYMEX 6 5% 10% 15% 8% 6% 15% 20% 10% 0,7 1,2 1,6 1 D(A,B) (B,C) D(A,C) 6 month Thill 0,4 0 -0,5 3% 1- Calculate the expected Return, the Volatility and Sharp ratio for the following Hypothetic portfolios: T-bill Portfolio 1 Portfolio 2 Portfolio 3 Stock A 30% 40% 20% Stock B 70% 40% 30% 20% 50% 2- Please interpret the outcomes of question 1, which portfolio is the best based on MPT? 3- Calculate the minimum required rate of return for each stock. Please interpret the outcomes 4- Calculate the beta of each portfolio and calculate the Treynor ratio