You found the following information on 2 listed stocks on an exchange: Standard Deviation (%) 30 13 Stock A Stock B Forecast returns (%) 16 6 Beta 1.5 0.7 A financial website stated that the S&P 500 forecast returns is 10% and risk free rate is 5%. (a) According to CAPM, what are the expected returns and alpha of stocks A and B? (4 marks) (b) According to your answers in part (a), which stock you will invest? Explain (2 marks). Draw a graph shows the SML, positions of stocks A and B. (2 marks) (c) Your friend tells you stock C with expected rate of return is 27%, the risk free rate is 5% and the market risk premium is 12%. If CAPM is valid, calculate the stock beta (2 marks)