Specific versus Market Risk. Figure 12.11 shows plots of monthly rates of return on three stocks versus the stock market index. (The plots are similar to those in Figure 12.2.) The beta and standard deviation of each stock are given beside its plot. (L012-1) a. Which stock is safest for a diversified investor? b. Which stock is safest for an undiversified investor who puts all her funds in one of these stocks? c. Consider a portfolio with equal investments in each stock. What would this portfolio's beta have been? d. Considera well-diversified portfolio made up of stocks with the same beta aste he the beta and standard deviation of this portfolio's return? The standard deviation of the ket portfolio's returis 2014 What is the expected rate of return on each sock? Use the capital asset pricing model with a market risk premium of 8. The risk-me rate of interestis 20 15 10 15 Snake Off return . 20 -10 0 20 Market return (a) 405 30 20 10 Marathon Oil return -109 10% -20% Beta 2.39 Sid dev = 43.7% -30% Market return (b) 30 - 20% 158 Intereum () -10% . 10% Bets1OY Sid dev2005 -20% Market return (c) 30% 25% - 20% - . 15% 10% 5% Return on Walmart (%) -10% -5% 5% 10% -5% -10% --15% Beta = 37 -20% Std dev = 16.4% Market return (%)