7. Richard Morgan, another individual investor wants to purchase four stocks for his portfolio. The expected return, portfolio weights, and the betas of the stocks are given below: Stocks Beta Portfolio weight Expected return Goodman Industries 0.7 30% 9.20% Renfro Inc. 0.79 20% 9.74% Heath Inc. 1.1 30% 11.60% Lincoln Inc. 1.44 20% 13.64% Calculate the portfolio beta. Calculate the portfolios required rate of return. 8. Efficient Markets Hypothesis (EMH) holds that security prices adjust quickly to new intrinsic value as soon as new information becomes available. Distinguish among the three forms of the EMH. 9. A new body of evidence is emerging in the field of behavioral finance which shows that investors often behave irrationally, but in predictable ways. Explain the following biases that affect the rationality of peoples decision-making process: overconfidence self-attribution bias herding 10. The Fama-French three-factor model predicts stocks return given the return of the market, the SMB portfolio, and the HML portfolio. The model is given as: Predicted return = ai + bi (r M,t) + ci (r SMB,t) + di (r HML,t). You have estimated that ai = 0, bi = 1.2, ci = -0.4, and di =1.3. On May 1, the market return (rM,t), was 10%, the return on the SMB portfolio (rSMB) was 3.2%, and the return on the HML portfolio (rHML) was 4.8%. i. using the model, predict the stocks return for the month of May 1. ii. if the actual return of the stock is 17.5% on May 1, calculate the unexplained return of the stock.