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Problem 4. We have a financial market with many stocks and a risk-free asset. Assume that the expected return and risk of the market portfolio are M-7% and OM-10%, and the risk-free return is R-496. a) (3 pts) Consider two stocks S1 and S2. Your investment banker friend tells you that he has an inside information according to which ,-5% and 2-10%. From historical data you estimate the beta factors of the two stocks to be = 0.7 and A = 1.4. If you believe in your friend's information more than you believe in CAPM, which of the stocks should you buy and which should you sell? b) (2 pts) Let V and P be two portfolios. Assuming that (ov,m) = (15%, 8.5%) and (Op, -) (4%,5%), for each of the portfolios V and P determine if it lies on the Capital Market Line