You estimated the single index (market) model for stocks A and B with the following results: Return on Stock A: RA = 0.06 + 0.5RM + CA Return on Stock B: RB = 0.04 + 1.5R + eB Where RM is return on the single index and A and B are error terms which are not correlated with anything and have zero means. In addition, the following statistics are known for the risk-free rate, RM, and the error terms: Mean Risk-free rate 3% Single index return, RM Error term for Stock A return, eA 10% 0% Error term for Stock B return, B 0% Standard Deviation 0% 15% 20% 10% Based on the information above, calculate the smallest possible portfolio return standard deviation one can get by forming a portfolio of Stock A and B. Hint: Recall the formula for the minimum variance weight on A is: WA = - OA,B 0 +0-20A,B where ; is the return standard deviation of asset i (i=A, B), and A,B is the covariance between assets A and B. (Total for Question: 7 marks)