1. Assume that the average annual return on the market index from history is 13%. The average risk-free rate is 3%. If the current T-bill rate is 4%,

1. What is expected return on the market index?
2. If stock W has a beta of 1.6, what is its expected rate of return using the CAPM model?
3. Alternatively, analysts have estimates and ratings for stock W as follows. Stock Ws current price is $100. Stock W does not pay dividend.

Analyst Opinion	12 month Target price	Number of Analysts
Strong buy	$125	6
Buy	110	4
Hold	102	3
Sell	90	2
Strong sell	80	1

What is expected rate of return on Stock W based on analysts forecast?