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1. Suppose we have one riskyasset Stock I and a risk-free asset. Stock I has an expected returnof 25% and a beta of 2. The risk-free asset’s return is6%. (15 marks total)a. Calculate theexpected returns and betas on portfolios with x% invested in StockI and the rest invested in the risk-free asset, where x% = 0%, 25%,75%, 100%, 125%, and 150%. b. Whatreward-to-risk ratio does Stock I offer? How do you interpret thisratio? (1.5 marks)c. Suppose we havea second risky asset, Stock J. Stock J has an expected return of20% and a beta of 1.7. Calculate the expected returns and betas onportfolios with x% invested in Stock J and the rest invested in therisk-free asset, where x% = 0%, 25%, 75%, 100%, 125%, and 150%. d. Whatreward-to-risk ratio does Stock J offer? How do you interpret thisratio? (1.5 marks)e. Plot theportfolio betas against the portfolio expected returns for Stock Ion a graph, and link all the points together with a line. Then plotthe portfolio betas against the portfolio expected returns forStock J on the same graph, and link all these points together withanother line. (This can be done easily with the charting functionin Microsoft Excel.) f. Use the graphin part (e) above, together with your answers to parts (b) and (d)above to explain why Stock J is an inferior investment to StockI. g. Can a situationin which one stock is inferior to another stock persist in awell-organized, active market? Why or whynot?