Suppose that the CAPM holds and correctly prices all assets in the financial market. Consider the following probability distribution of returns on portfolio P and the market portfolio. Probability Portfolio P Market State of Economy Boom Normal Bust 0.2 0.6 15% 10% -5% 10% 6% 2% 0.2 a. Suppose that another well-diversified portfolio K has a beta of 1.5, and its standard deviation of the error term is zero. What are portfolio K's expected return and Treynor ratio? (6 marks) b. Based on her risk preference, a rational mean-variance optimizing investor under the CAPM intends to have a target risk (i.e., standard deviation), which is only a half of that of the market portfolio. Determine the expected return for her (complete) portfolio. (2 marks) c. Stock C has a beta of O and a return standard deviation of 6%. What is the minimum return standard deviation of a two-asset portfolio consisting of stock C and the market portfolio