portfolio manager is interested in constructing a portfolio using three asset classes: U.S stocks, U.S bonds, and foreign bonds. The research team estimates the following inputs for calculating the expected return and variance of the three asset portfolio. The team also forecasts the expected return and the standard deviation of the Morgan Stanley EAFE index (Europe, Australia, Far East) as a proxy for the market portfolio Asset Expeted return (%) Standard Deviation (%) U.s Stocks 12 20 U.s Bonds 8 12 Foreign stocks 18 30 MArket portfolio- EAFE 15 28 Risk-free rate 5 Correlation matrix U.S stocks U.S bonds Foreign Stocks U.S stocks 1.00 U.s bonds 0.0 1 Foreiign bonds -0.10 0.0 1 Based on the estimate above, the portfolio manager decides to construct a portfolio that is 1/3 in U.S stocks, 1/3 in U.S bonds, and 1/3 in foreign bonds. The manager is also interested in the beta coefficient measured against the EAFE index for the portfolio that she constructs. The expected return for U.S stocks reported in the table above is equal to the value predicted by the CAPM. Based on this, the beta for U.S stocks is closest to: A. 0.70 B. 1.00 C. 1.25 D. 2.00