Question: Problem 2 (22%) You are given the following information concerning two stocks: Firm-Specific Beta Standard Deviation Stock A 0.9 20% Stock B 1.5 15% The

Problem 2 (22%) You are given the following information concerning two

Problem 2 (22%) You are given the following information concerning two stocks: Firm-Specific Beta Standard Deviation Stock A 0.9 20% Stock B 1.5 15% The market portfolio has a mean return of 10% and a standard deviation of 15%. The risk-free rate of return is 2%. We assume that the CAPM is valid. a) What is the mean (expected) return of stocks A and B? b) What is the standard deviation of stocks A and B? c) What is the correlation coefficient between stocks A and B and what is the covariance

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