You are managing an equal-weighted portfolio of stocks (A&B) on behalf of your

company's treasury. Assume that stock A and stock B are two risky assets. C is a risk-free asset. The details of these stocks are below:

Stock A Stock B C (Risk-free asset r_f)

Average return 7.00% 15.00% 2.00%

Variance of return 0.0064 0.0196

Sigma of return 8.00% 14.00%

Covariance of returns 0.0011

Required

Using the information in the above stated table calculate the following:

a. Expected market portfolio return, E (RM) and the market excess return.

b. The Sharpe ratio