Suppose that the risk-free interest rate is 0.023, that the expected return on the market portfolio is _M = 0.10, and that the volatility of the market portfolio is _M = 0.12

(a) What is the expected return on an efficient portfolio with _R = 0.05?

(b) Stock A returns have a covariance of 0.004 with market returns. What is the beta of Stock A?

(c) Stock B has beta equal to 1.5 and = 0.08. Stock C has beta equal to 1.8 and = 0.10.

i. What is the expected return of a portfolio that is one-half Stock B and one-half Stock C?

ii. What is the volatility of a portfolio that is one-half Stock B and one-half Stock C? Assume that the s of Stocks B and C are independent