I need answers on the following problems

BA 452 Quantitative Analysis Final Exam Backward Induction Question 5. Use backward induction (and draw a decision tree, if needed) to help make the following sequential decisions, where later decisions depend on earlier decisions: 1. Should the Bayer Biological Products Group spend $20 million to begin preclinical development of a new blood-clot-busting drug? a. The probability of successful testing on humans is 0.7 b. If the testing is not successful, the project is terminated c. If the testing is successful, the project requires $2 million to file a license with to the FDA. The probability of successful filing 0.9 d. If the filing is successful,, demand and revenues are uncertain: i. With probability 0.4, demand is low and revenue is $60 million. ii. With probability 0.1, demand is medium and revenue is $80 million. iii. With probability 0.5, demand is high and revenue is $100 million. 2. If the testing on humans were successful, should the Bayer Biological Products Group sell its rights in the project for $70 million? Compute expected profit for the Bayer Biological Products Group.13) The following table shows the beta and expected return for each of five stocks. Stock (i) B, E(r) 1 1.2 0.124 2 1.0 0.110 3 0.7 0.103 4 0.4 0.068 5 0.1 0.047 All of these stocks except one lie on the Security Market Line. Calculate the alpha of the stock that does NOT lie on the Security Market Line. A) -0.026 B) -0.014 C) 0.000 D) 0.014 E) 0.02614) You are given the following information about Stock X, Stock Y, and the market: (i) The annual effective risk-free rate is 4%. (Hi) The expected return and volatility for Stock X, Stock Y, and the market are shown in the table below: Expected Return Volatility Stock X 5.5% 40% Stock Y 4.5% 35% Market 6.0%% 25% (iii) The correlation between the returns of stock X and the market is -0.25. (iv) The correlation between the returns of stock Y and the market is 0.30. Assume the Capital Asset Pricing Model holds. Calculate the required returns for Stock X and Stock Y, and determine which of the two stocks an investor should choose. (A) The required return for Stock X is 3.20%. the required return for Stock Y is 4.84%, and the investor should choose Stock X. (B) The required return for Stock X is 3.20%, the required return for Stock Y is 4.84%, and the investor should choose Stock Y. (C) The required return for Stock X is 4.80%, the required return for Stock Y is 4.84%, and the investor should choose Stock X. (D) The required return for Stock X is 6.40%, the required return for Stock Y is 3.16%, and the investor should choose Stock Y. (E) The required return for Stock X is 3.50%, the required return for Stock Y is 3.16%, and the investor should choose both Stock X and Stock Y.15) You are given the following information about Stock X, Stock Y, and the market: (i) The expected return and volatility for Stock X, Stock Y, and the market are shown in the table below: Required Return Volatility Stock X 3.0% 50% Stock Y 35% Market 6.0% 25% (ii) The correlation between the returns of stock X and the market is -0.25. (iii) The correlation between the returns of stock Y and the market is 0.30. Assume the Capital Asset Pricing Model holds. Calculate the required return for Stock Y. (A) 1.48% (B) 2.52% (C) 3.16% (D) 4.84% (E) 6.52%16) You are given the following information about Stock X and the market: (i) The annual effective risk-free rate is 5%. (ii) The expected return and volatility for Stock X and the market are shown in the table below: Expected Return Volatility Stock X 5% 40% Market 8% 25% (iii) The correlation between the returns of stock X and the market is -0.25. Assume the Capital Asset Pricing Model holds. Calculate the required return for Stock X and determine if the investor should invest in Stock X. (A) The required return is 1.8%, and the investor should invest in Stock X. (B) The required return is 3.8%, and the investor should NOT invest in stock X. (C) The required return is 3.8%, and the investor should invest in stock X. (D) The required return is 6.2%, and the investor should NOT invest in Stock X. (E) The required return is 6.2%, and the investor should invest in stock X