1. Assume a two-factor model explains stock returns. Regression estimates of stocks A and B on the two factors are given below. Stock a BU B A 2 1.2 -0.5 4 B 3.5 -0.8 2.0 3 Assume further that factor one has expected return of 10 and standard deviation of 8. Factor two has expected return of 5 and standard deviation of 6. a) Calculate expected returns for A and B. b) Calculate standard deviations for A and B. c) Calculate the expected return on a portfolio that invests 60% in A and 40% in B