3. Consider three stocks A, B and C and a market index M with the following prices:YearTOT1T2T3A85108110125B12141315C50607075M1128143515781786The risk-free rate equals 4%.a. Compute the expected return and risk on each stock and the market index.b. Construct the matrix of variances and covariances between these assets.c. Construct the matrix of the correlation coefficients.d. Compute the beta coefficients of these companies and the expected return at equilibrium.e. Construct the minimum risk portfolio P1 composed of A and C. Compute the expected returnand risk on this portfolio.f. Construct a portfolio P2 composed of A, B and C in proportions of 20%, 30% and 50%.Compute the expected return and risk on this portfolio. What is the contribution of each securityto the return and risk pf this portfolio?g. Construct an equally weighted portfolio P3 composed of A, B, C and the risk-free rate.Compute the beta coefficient and position this portfolio with respect to the SML. Compute theHPR expected by an investor who holds this portfolio.

Note: This question has several sub-parts. The first three have been answered below

3. Consider three stocks A, B and C and a market index M with the following prices: Year то T1 T2 110 13 T3 125 15 75 1786 108 85 12 50 A B 14 C 60 70 1435 1578 1128 The risk-free rate equals 4%. M a. Compute the expected return and risk on each stock and the market index. b. Construct the matrix of variances and covariances between these assets. c. Construct the matrix of the correlation coefficients.