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Refer to the following table for the next four problems: Stocks Portfolio Weights Beta Expected Return σ2(r) A 0.25 0.50 0.40 0.07 B 0.25 0.50 0.25 0.05 C 0.50 1.00 0.21 0.07 σ2(rm) = 0.06 a. What is the residual variance of each of the forgoing stocks? σ2(eA) = 0.055 σ2(eB) = 0.035 σ2(eC) = 0.010 b. What is the portfolio beta? bp = 0.75 c. What is the portfolio variance? σ2(rp) = 0.0419 d. What is the expected return on the portfolio? E(rp) = 0.2675

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