Please answer all questions.

A portfolio P is invested in two assets A and B, with the remainder being invested in the market M. The diversifiable components of A and B are uncorrelated with each other. Over the last year, you have the following statistics, where T denotes T-bills in which the portfolio was not invested: M T 4.4% A Return 8.8% Beta 0.9 Standard Deviation 22% Portfolio Weight 14% B 9.6% 1.1 25.4% 7.5% 9.0% 1.00 20% 78.5% (a) Compute the alpha for each asset A and B and for the portfolio P. Are these shares overvalued or undervalued? Given a market model, calculate the idiosyncratic risk for A and B. (b) (c) Assuming that the market's idiosyncratic risk is zero, calculate the beta of portfolio P, its idiosyncratic risk and total standard deviation. What helps you achieve a significant reduction in idiosyncratic risk of overall portfolio P? Calculate the Sharpe ratio of the portfolio P and the market. Does the presence of shares A and B in a portfolio P improve its Sharpe ratio? Carefully justify your answer. (d)