Question 9 (this question contains 3 parts, 3 points) Cisco and Pepsi are two stocks. The expected return of Cisco is 6%, and its standard deviation is 8%. The expected return of Pepsi is 3%, and its standard deviation is 4%. Assume that the returns on Cisco and Pepsi are perfectly negatively correlated (their correlation is -1). (a) What fractions of an investor's wealth should be held in Cisco and Pepsi in order to produce a zero-risk portfolio? (b) What is the expected return on the zero-risk portfolio? (C) Suppose that the risk-free T-bill rate is equal to 5%. Is there an arbitrage trade possible here? If so, how would you set up the arbitrage trade? You don't need to work out all the details, just summarize the trading strategy in the answer box. Argue why it is an arbitrage in the scratch paper. If not, why not? Again, describe your logic. Question 9 (this question contains 3 parts, 3 points) Cisco and Pepsi are two stocks. The expected return of Cisco is 6%, and its standard deviation is 8%. The expected return of Pepsi is 3%, and its standard deviation is 4%. Assume that the returns on Cisco and Pepsi are perfectly negatively correlated (their correlation is -1). (a) What fractions of an investor's wealth should be held in Cisco and Pepsi in order to produce a zero-risk portfolio? (b) What is the expected return on the zero-risk portfolio? (C) Suppose that the risk-free T-bill rate is equal to 5%. Is there an arbitrage trade possible here? If so, how would you set up the arbitrage trade? You don't need to work out all the details, just summarize the trading strategy in the answer box. Argue why it is an arbitrage in the scratch paper. If not, why not? Again, describe your logic