Please answer the following questions based on the below tables:

Table 1
Fund Name	Average Total Return %	Expense Ratio	Std. Dev. Of Returns
Fidelity Magellan	15.36	0.99	16.14
Fidelity Market Index (S&P500)	11.25	0.45	17.03
Bonds	7.05	0.00	6.55

Table 2
Fund Name	alpha %	beta	R-Squared %
Fidelity Magellan	3.81	0.98	81
Fidelity Market Index (S&P 500)	-0.45	1.00	100
Bonds	n.a	n.a	n.a

Table 3
Fund Name	Cash %	Stocks %	Bonds %
Fidelity Magellan	2.0	94.0	4.0
Fidelity Market Index (S&P500)	0.0	100	0.0

Table Notes

1. For purposes of estimating the market model, the market portfolio is defined as the actual S&P500 index.
2. The average return numbers in Table 1 already take into account the fund's expenses so there is no need to adjust for them.

Questions:

1. 1. Plot the Security Market Line estimated by Morningstar. Add on the graph the two Fidelity funds, as well as the risk-free asset and the actual (not Fidelity's) S&P500 index.
2. 2. Assuming that there are only two risky assets, stocks and bonds, plus a risk-free asset, cash, draw a reasonable-looking efficient frontier for stocks and bonds, then add the Capital Market Line.

For stocks, use Fidelity Market Index (S&P500). For the risk-free rate, use the value found in part d (if you didn't answer part d use a reasonable value).

Show on the graph bonds, cash, the market portfolio formed with stocks and bonds, and the two Fidelity funds. Is the location of Magellan compatible with the data in Table 3? What are possible explanations for the discrepancy?

3. Under the same assumptions as in part f, should anyone want to invest directly in Fidelity Market Index (S&P 500)? What instead should everyone hold in their portfolios? Explain how you would choose your own optimal portfolio.