Pinulo retums? 1 0 capital asset pricing model given historical data 2. Consider Table 1. (%) 3.77 Table 1 Summary Statistics Alpha, Beta, Expected Return and Variance a/c to the Stocks Sample Single Index Model Covariance Residual and Return Alpha Beta with Market Expected Variance Variance Market (%) (%) Return (%) (%) 3.60 3.59 4.80 Market 4.20 0.00 8.70 (a) Consider Table 1. Using the single index model, calculate beta and alpha for stocks 1 and 2. Interpret your findings. (6) Consider Table 1. Using the single index model, calculate the expected return, variance of returns, systematic risk, non-market risk for stocks 1 and 2, and the covariance between the returns for stocks and 2. Interpret your findings. Consider Table 1. Form an equally-weighted portfolio of stocks 1 and 2. Using the single index model calculate the expected return and standard deviation risk of this portfolio Sketch the set of portfolios comprised of stocks 1 and 2 (d) Consider Table 1. Suppose a third risky stock exists with expected return of 5% and standard deviation risk of 3%. Further suppose stock 3 has a market beta of 0. Forma portfolio of stocks 1 and 3. How does a portfolio of stocks 1 and 3 compare to a portfolio of stocks 1 and 2