$5$ You are an investment analyst at Brown Brothers, Butler evaluating the expected performance of $2$ companies'

common stock, Bahama Solar Ltd $($BS$)$ and Alpha Energy Solutions $($AES$).$ Your research has compiled the following data

and forecast:

Data

AES's beta is $1\mathrm{.}5$

BS$\text{'}$s beta is $0\mathrm{.}8$

$E(rm)$ is $11\mathrm{.}5\%$

Rf is $5\%$

Forecast

AES's return $13\mathrm{.}25\%$

BS$\text{'}$s return $11\mathrm{.}25\%$

What is the required rate of return for AES and BS$?$

State whether each stock is overvalued, undervalued or fairly price.

Which stock will you recommend to your clients and why?

$6$ Bahama Solar may issue a $10$ year maturity fixed$-$income security, which might include a sinking fund provision and

either refunding or call provision.

A Describe a sinking fund provision.

$B$ Explain the impact of a sinking fund provision on:

i$)$ The expected average life of the proposed security

ii$)$ Total principal and interest payments over the life of the proposed security.

$C$ From the investor's point of view, explain the rationale for demanding a sinking fund provision.