d) Sophisticated investors use the Sharpe CAPM to price stocks by constructing an efficient tangency portfolio. The following table gives some characteristics of two risky assets - stocks and bonds. Also shown are weights in the tangency portfolio P, which is constructed to be mean-variance efficient, i.e., it provides the highest expected return for its level of variance. Asset Weigh in Market Expected Standard Covariance Covariance Portfolio P Return Deviation With Stocks With Bonds Stocks 0.40 ? 0.20 1.00 0.05 Bonds 0.60 ? 0.10 0.05 1.00 If the expected return on the tangency portfolio P, E(rp) is equal to 0.09 or 9 percent, what are the expected returns on stocks and bonds? Assume the risk-free rate, rf is equal to 0.04 or 4 percent and show all working steps clearly. Also justify the use of the formulas at the beginning. (10 marks) d) Sophisticated investors use the Sharpe CAPM to price stocks by constructing an efficient tangency portfolio. The following table gives some characteristics of two risky assets - stocks and bonds. Also shown are weights in the tangency portfolio P, which is constructed to be mean-variance efficient, i.e., it provides the highest expected return for its level of variance. Asset Weigh in Market Expected Standard Covariance Covariance Portfolio P Return Deviation With Stocks With Bonds Stocks 0.40 ? 0.20 1.00 0.05 Bonds 0.60 ? 0.10 0.05 1.00 If the expected return on the tangency portfolio P, E(rp) is equal to 0.09 or 9 percent, what are the expected returns on stocks and bonds? Assume the risk-free rate, rf is equal to 0.04 or 4 percent and show all working steps clearly. Also justify the use of the formulas at the beginning. (10 marks)