Assume that security returns are generated by the single- index model, Ri= ai + BiRM + ei where R is the excess return for security i and RM is the market's excess return. The risk-free rate is 3%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security B Security A Security B Security C Bi 1.5 1.7 1.9 a. If OM= 26%, calculate the variance of returns of securities A, B, and C. (Do not round intermediate calculations. Round your answers to the nearest whole number.) Security A Security B Security C E(ri) 15% 17 19 O Yes O No b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. If one forms a well-diversified portfolio of type A securities, what will be the mean and variance of the portfolio's excess returns? What about portfolios composed only of type B or C stocks? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.) o(ei) 29% 15 24 Variance Mean % % % Variance c. Is there an arbitrage opportunity in this market