1.Based on five years of monthly data, you derive the following information for the companies listed:

Company

Intel

0.22

12.10%

0.72

Ford

0.10

14.60%

0.33

Anheuser Busch

0.17

7.60%

0.55

Merck

0.05

10.20%

0.60

S&P 500

0.00

5.50%

1.00

a.Compute the beta coefficient for each stock

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b.Assuming a risk-free rate of 8 percent and an expected return for the market portfolio of 15 percent, compute the expected (required) return for all the stock and plot them on the SML

c.Plot the following estimated return for the next year on the SML and indicate which stock are undervalued or overvalued

Intel - 20 percent

Ford - 15 percent

Anheuser Busch - 19 percent

Merck - 10 percent