Assume that security returns are generated by the single-index model, Ri = αi + βiRM + ei where Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data:

Security βi E(Ri) σ(ei)
A 0.6 7 % 16 %
B 0.9 10 7
C 1.2 13 10

a. If σM = 22%, calculate the variance of returns of securities A, B, and C. (Do not round intermediate calculations. Round your answers to the nearest whole number.)
b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C?
c. Is there an arbitrage opportunity in this market? What is it? Analyze the opportunity graphically.

Government ownership and control of resources

$527.7.if the following was the question  $527.7 is the answer.students who are trying to raise funds have an agreement with a local pizza chain. the chain has agreed to sell them pizzas at a discount, which the students can then resell to families in the local community for a profit. it is expected that of the 500 families in the community, at most 70% will buy pizza. based on a survey of their personal preferences, the students believe that they should order no more than 120 cheese pizzas, no more than 150 pepperoni pizzas, and no more than 100 vegetarian pizzas. they also want to make sure that at least 20% of the total pizzas are cheese and at least 50% of the pizzas are pepperoni. they make a profit of $1.45, $1.75, and $1.98, respectively, for each cheese, pepperoni, and vegetarian pizza they resell. how many pizzas of each type should they buy?