2. Bond Yields: Y At the begi $1.000 years Part : Problems - questions (50 pts.) ve THREE of the following FOUR numerical problems. You must show all work for full credit. Partial Credit will be given 1. CAPM / Portfolio Theory An investor currently holds the following portfolio of 4 stocks, each having equal weight. Stock Expected Return ) Beta 11.4% 10.2% 8.4% 72 0.7 1.4 12 a. What is the portfolio's expected return? b. What is the portfolio's beta risk? Is it more or less risky than the market? The investor is not comfortable with holding a portfolio that has a risk not equal to that of the market. She is thinking about purchasing a fifth stock, stock E, in order to change the risk of the portfolio c. What should the bota of Stock Ebe in order to make the portfolio have market rink? Assume al stocks have equal weight in the new portfolio d. According to the CAPM, what is Es expected return if the risk tree rate is 3% and the market risk premium (RPM) is 6%? e. What will be the expected return of the portfolio with E included? equal weight work for the 2. Bond Yilde: YTM vs. VTC At the beginning of 2019, ABC Corp. issued (sold) $50 million in 20 year calable bonds $1,000 paying a 5.0% annual coupon rate that is paid semiannually. The bonds are alla years for a call premikun equal to one annual coupon payment. During 2019, intereses de and ADC's bonds are now tracting for $1.030.00 at the beginning of 2020 What is the amount of the semiannual interest payment you can expect to cove from this bond? b. What is the new yield to maturity (UTM) of the bonds at the beginning of 20207 c. What is the new yield to call (YTC) at the beginning of 2020? d Should investors expect to receive YTC or YTM? Why? e. How much will the firm save or lose each year in interest if the existing bonds are called and reissued? You may ignore any costs involved in calling re-issuing the bonds