2. Stock Beta Expected Return observed in stock exchange 8.80% A 1.3 0.9 B 7.60% 2.0 12.00% D 0.4 3.75% E 0.2 2.47% T-Bill return: 2% Market Expected Return: 7% a. Based on the CAPM, what are the expected returns on the 5 stocks above? (5 Points) b. Which stocks are undervalued, overvalued, fairly priced? (Hint: If the stock lies on the SML, it is priced correctly.) (10 Points) c. Among the $15,000 you own, you invest $5,000 in the market portfolio, $2,500 in T-Bill, and the remaining amount in each of the above 5 stocks with equal amount, what is the beta of your portfolio? (5 Points)