II. The single-index model for stock i is ri-rf=2(rm-rf) + ei. The single-index model for stock j is rj -rf=2(IM--rf) + ej. The standard deviation of the stock market return is om=0.1, the standard deviation of ei is Dei=0.1 and the standard deviation of e; is Oej=0.2. The expected stock market return E(rm) is 10% and the risk-free rate rf is 5%. (20 points) (a) Calculate the systematic risk, firm-specific risk, and total risk of stock i and j. (b) Which stock has higher total risk and which stock has higher expected return? Does the stock with the higher total risk should have higher expected return? Explain (c) Calculate R?, the fraction of the total risk that is attributable to the systematic risk for stock i. (d) Calculate the covariance between stocks i and j. (e) Suppose that an investor invests 50% of her money in stock i and 50% of her money in stock j. What is beta of the stock portfolio