a. Compute continuously compounded monthly return of the above stocks and index using adjusted Close Price (Adj Close) (4 marks). Hint: Use Excel function In to compute the compounded monthly return. Re = In(Close Price,) - In(Close Price,-1) where In means natural logarithm. b. Compute expected return for the above stocks and index (4 marks). C. Compute return correlation coefficient between two stocks and between each stock and the market index. Hence, comment on the return movement of these stocks and index. If you were to form a portfolio of 2 stocks which ones would you choose to maximise diversification benefit? (9 marks) at: Use Excel function CORRELO to compute the correlation coefficient between two data ies. d. Assume Ry to be 1.5% and E (Rm ) to be 7.5%. Using the CAPM model, calculate the expected return for each stock and compare it with (b). Explain why the expected return from the CAPM is different from answers in (b)? Is the stock undervalued or overvalued? Explain. (8 marks)