Suppose that two stocks, and B, have the same beta = 1. The standard deviations of the idiosyncratic returns for the two stocks, A and B, are the same and equal to 30% (Using the notation in our class, ea = OEB= 30%). Suppose that an analyst uses CAPM to study the two stocks and finds that stock A has an alpha of 2% and the stock B has an alpha of -2%. Suppose the analyst buys $10,000 of stock A, and short sells $10,000 of stock B. (Hint: If CAPM holds, then expected return of any stock i is Ri= ai +R$+B[{Rm R)+ 1. Rf is the risk-free return, Rm is the market return and is the idiosyncratic return. The expectation of the idiosyncratic return for any stock is equal to 0%. Think about the covariance of idiosyncratic returns for any two stocks.) 5. What is the expectation and standard deviation of the analyst's profit (in dollars)? Suppose that two stocks, and B, have the same beta = 1. The standard deviations of the idiosyncratic returns for the two stocks, A and B, are the same and equal to 30% (Using the notation in our class, ea = OEB= 30%). Suppose that an analyst uses CAPM to study the two stocks and finds that stock A has an alpha of 2% and the stock B has an alpha of -2%. Suppose the analyst buys $10,000 of stock A, and short sells $10,000 of stock B. (Hint: If CAPM holds, then expected return of any stock i is Ri= ai +R$+B[{Rm R)+ 1. Rf is the risk-free return, Rm is the market return and is the idiosyncratic return. The expectation of the idiosyncratic return for any stock is equal to 0%. Think about the covariance of idiosyncratic returns for any two stocks.) 5. What is the expectation and standard deviation of the analyst's profit (in dollars)