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The figures below show plots of monthly rates of return on three stocks versus those of the market index. The beta and standard deviation of

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The figures below show plots of monthly rates of return on three stocks versus those of the market index. The beta and standard deviation of each stock is given beside the plot. a. Which stock is safest for a diversified investor? b. Which stock is safest for an undiversified investor who puts all her money in one of these stocks? c. Consider a portfolio with equal investments in each stock. What would be this portfolio's beta? d. Consider a well-diversified portfolio composed of stocks with the same beta and standard deviation as ford. What are the beta and standard deviation of this portfolio's return? The standard deviation of the market portfolio's return is 20%. e. Use the capital asset pricing model to estimate the expected return on each stock. The risk-free rate is 4%, and the market risk premium is 8%

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