Suppose CAPM assumptions hold. Suppose you are given the following regarding two assets A and B traded in a market M: Er=10.5% Erg=13% and and BA=0.7 BB=1.2 Answer the following questions: 1. [2] Compute the expected rate of rate of return on the market M and the risk-free rate. 2. [1] Suppose you decided to invest 30% of your wealth in A, 30% in B, and 40% in the risk-free asset. What is the expected rate of return and the beta of the constructed portfolio? 3. [2] Suppose you decided to revise the previous portfolio as follows: sell some of your holdings of the risk-free asset and use the proceeds to buy the market portfolio in order to achieve a target rate of return of 12.55%. Characterize this new portfolio, i.e., find the weights of the assets in this new portfolio and its beta coefficient.