Question 3 Assume a CAPM world with three risky securities but no risk tree asset. The expected payoffs of the securities are-1.14and -18 and the variance covariance matrix is 10 - 15 OS The market portfolio is - (1,1,1) and security prices are (a) What is the expected return on the market portfolio? What is the variance at the return on the market portfolio? (5 Marks) (b) Find the zero beta portfolio with the smallest variance and unit cost. What is its expected return, and what is the variance of its return? (10 Marks) (e) What is the beta of a portfolio that is one unit long in the first security and one unt short in the second security? (4 Marks) (a) What is the beta of a portfolio that is one unit short in the market portfolio and one unit long in the zero beta portfolio from (D). (5 Marks) (Total 24 Marks) Question 4 (a) Why wil an American call option on a stook that pays no dividend be priced exactly like a European call option on the same stock? (4 Marks) (b) Consider a European put option written on a stock that is now worth - 100 with maturity and striker = 110. Suppose the risk-tree rate isr=1/10 and a (European) call option written on the same underlying with the same maturity (T=2), and with the same striker = 110) costs = 3. What is the price of the put option? (Marks) (c) Assume a multiplicativo binomial process with 0