Problem 2 You learn the following information from a financial analyst who has been following these three stocks: You also learn that the risk-free rate is 2%, and the expected market return is 12% per year. i. Which stock has the highest risk? Why? a. Stock Pear because it has the highest beta; b. Stock Banana because it has the lowest expected return; c. Stock Orange because it has the lowest beta; d. All stocks have the same risk because the idiosyncratic risk is diversifiable. ii. If the analyst is right, which stock(s) is/are underpriced? iii. Based on your analysis in (ii), which stock(s) should you buy? Which stock(s) should you sell or short sell