Consider an economy with two risky assets A and B with perfectly negative correlation of returns (1). Standard deviations of these stocks are higher than 10%. You have the following information about the portfolios which can be constructed using these assets: b) Calculate the standard deviations and expected returns of stocks A and B. c) it possible to construct a risk-free portfolio using stocks A and B. Explain. If the answer is "yes" find this portfolio. d) Plot all stocks and portfolios from the previous points on the mean-standard deviation graph. e) Assume that short positions are prohibited. What portfolio rational risk-neutral agent will choose? Assume now that CAPM holds. You need to estimate the price of one stock of company XYZ. You expect that this company's earnings per share will be $4 in one year, your estimation of Present Value of Growth Opportunities today is $40. The company has just paid out the dividend for the previous financial year. Expected return of market portfolio is equal to 20%, its standard deviation is equal to 55% and covariance between the returns on XYZ and market portfolio is 0.5 . The risk-free rate is 5%. f) Find the price of a stock. g) Is the statement below True or False? Explain your answer. "Agents who believe in CAPM will never buy assets which lies in the feasible region but not on the efficient frontier