Consider an economy with two states which occur with equal probability. Suppose the CAPM holds. The risk free rate is 2%. The market portfolio has an expected return of 12% and generates the state dependent payoff (100, 200) at t=1. There are two assets. Asset A generates the state dependent payoff (10,40) at t=1. Asset B generates the state dependent payoff (30,20) at t=1. Suppose an investor has mean variance (CAPM-) preference and can either choose asset A or asset B for free. Which asset should he choose? [6p] What is the maximum price the investor is willing to pay for the chosen asset? [2p]