Question: Assume that security retums are generated by the single-index model. Ri+ai+iRH+ei where Ri is the excess return for security /and Rm is the market's excess

Assume that security retums are generated by the single-index model. Ri+ai+iRH+ei where Ri is the excess return for security /and Rm is the market's excess return. The risk-free rate is 2%. Suppose also that there are three securities A,B, and C, characterized by the following data: 0. If oy =18x, calculate the variance of returns of securities A,B, and C b. Now assume that there are an infinite number of assets with return characteristics identical to those of A,B and C, respectively What wil be the mean and variance of excess refurns for securities AB, and C ? (Enter the variance answers as o percent squered and mean as o percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.)

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