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Question 4 [3 points] Suppose that the Capital Asset Pricing Model (CAPM) holds. The market portfolio has an expected return of 9% and a standard

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Question 4 [3 points] Suppose that the Capital Asset Pricing Model (CAPM) holds. The market portfolio has an expected return of 9% and a standard deviation of 16%. Stock AAA has an expected return of 12%, a beta of 1.4, and a standard deviation of 28%. a. What is the risk-free rate? [1 point] b. What is the alpha of stock AAA? [1 point] c. What proportion of the total risk of stock AAA is idiosyncratic? [1 point]

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