We run CAPM regressions with stock A, stock B and stock C. We also calculate some summary statistics (average returns and correlation with market) for each stocks returns. The results are given below, where intercept and Market-rf denote regression output and the final two columns are summary statistics from the data.

Sharpe Ratio Beta for Market - rf Correlation with market .3 1.00 .70 .25 .90 .60 .35 1.10 .80

a) Which stock has the highest systematic risk in the context of the CAPM model?

b) Is it possible that this stock is actually not the stock with the highest systematic risk? Explain your answer.

c) Assume the risk free rate is given by rf = 0.02, market variance is 0.25 and mean market excess (above rf) return is 0.05. Rank the stocks by their risk-return relation according to the CAPM. For full credit show your work and explain why you rank them the way you do.