5. As a mobile gaming enthusiast, you own a portfolio of stock invested in Zynga, Inc. (ZNGA) and King Digital Entertainment (KING). Your portfolio composed of KING and ZNGA stocks have the following characteristics: Company Price Shares Bi E[ri] SD(ri) Owned KING $20 135 40% ZNGA $4.50 600 2.74 30% a) Suppose you don't know the or expected return of KING, but you have the following table of historical annual returns: 2007 16% 2008 -15% 2009 -9% 2010 3% 2011 8% 2012 18% 2013 40% What is your best estimate of the expected return of KING stock, based on these annual returns? What is the firm's based on this expected return, assuming a risk free rate of 3% and a Market Risk Premium of 5%? (assume 3% and 5% for the risk free rate and Market Risk Premium for the remainder of problem 10, as needed) b) What are the weights of KING and ZNGA in the portfolio? What is the of the portfolio and its expected return? c) Assume the correlation of returns between KING and ZNGA is .2 (ie corr(rking, PzNGA) .2). Also assume Game Stop (GME) has a correlation of returns less than one with both ZNGA and KING (corr(rme, ri)