UL Expected rate of 0.5 UN SIL (b) [15 marks) The following information is provided for a stock market: - Beta PjM Assett: 0.75 0.5 Oj OM return Asset 1 0.6 0.12 Asset 2: 0.25 0.2 Asset 1: 7% Asset 2 0.04 2 0.32 30 Asset 3 0.8 Asset 3 Asset2: Risk-free return: ro = 1% Asset 3: Notation: 0; = standard deviation of asset j's rate of return; jm = covariance of the rate of return on asset with that on the market portfolio, where j = 1, 2, 3. Assume that the expected rate of return on the market portfolio, um, is 9%, with standard deviation of return on = 0.4. Answer for ci) (i) Assuming that CAPM applies to the information above, show how to apply your analysis in part (a) to calculate each asset's beta-coefficient and to predict its ex- pected rate of retum. Hence, explain how the CAPM can be applied to interpret why assets' riskiness' differs. (((ii) Determine which, if any, of the assets above lies on the Capital Market Line and interpret your result