1. Assume Gracie Stock provides an actual return of 8.5%. The covariance between Gracie and the market portfolio is 0.0354 and the standard deviation of the market portfolio is 0.2324. Assume the risk-free rate is 2% and the expected return on the market portfolio is 12.5%. What does the CAPM say about the expected return on Gracie Stock? Is it overpriced or underpriced?

2. Zoomer stock has a beta of 1.16. The return on t-bills is 3.07% and the expected return on the market portfolio is 11.81%. What is the excess return on Zoomer stock over the risk-free rate?

3. Fama and Shiller, Inc., has expected earnings of $3 per share for next year. The firm's ROE is 20%, and its plowback ratio is 70%. If the F&S's market capitalization rate is 15%, what is their present value of its growth opportunities (PVGO)? (Hint: Start with their No-growth value)

4.

Return 15% SML 10% 5% 2 Beta What is the alpha of a portfolio with a beta of 2 and actual return of 16%

Return 15% 10% 5% 2 SML Beta What is the alpha of a portfolio with a beta of 2 and actual return of 16%?