a.What is the expected rate of return for a stock that has a beta of 0.9 if the expected return on the market is 15% and T-bill rate is 5%.

b.Wilson is now evaluating the expected performance of two common stocks, Furhman Labs Inc. and Garten Testing Inc. He has gathered the following information:

The risk-free rate is 5%.

The expected return on the market portfolio is 10.5%

The beta of Furhman stock is 1.5.

The beta of Garten stock is 0.8.

Based on his own analysis, Wilsons forecasts of the returns on the two stocks are 13.25% for Furhman stock and 11.25% for Garten stock. Calculate the required rate of return for Furhman Labs stock and for Garten Testing stock. Indicate whether each stock is undervalued, fairly valued, or overvalued.