State of Probability of Returns if State Occurs Economy State of Economy Stock A Stock B Stock C Boom 20% 25% 10% 5% Recession 80% -30% 5% 10% The expected return on the market portfolio is 7% and the US Treasury bill yields 3%. The capital market is currently in equilibrium. (a) (5 points) Which stock has the most systematic risk? Provide all the steps and equations. (b) (5 points) Which stock has the most unsystematic risk? Explain why. Provide all the steps and equations. (c) (10 points) What is the standard deviation of a portfolio which is comprised of $8,400 invested in stock A, $3,600 in stock B, and $8,000 in stock C? (d) (5 points) If the expected inflation rate is 2.5%, what is the exact expected real return on the portfolio of part (c)