please answer all them, i have enough questions left!

question #1 please :)

Examples on Asset Pricing Models 25 (2-2)(RA) = 12.2%; EOR 1. You are given the following equilibrium expected returns and risks: 3.7 (RM-Red E(RA) = 12.2%; E(RB) = 15.5%; Ba=0.7; BB = 1.25. ER2=0.08 +0.06 Bi a. What is the equation of the Security Market Line? b. A portfolio, made up of A (above) and another security, has a beta of 1.10 and expected return of 13%. Which one would you rather buy - A alone or the portfolio? Why? Elr -14.61 3-1. 7 Oven VAL > BUY A Given the SML above, what is the maximum you will be willing to pay today for a stock that has a beta of 0.6, if the expected price next year is $48 and it is expected to pay dividends of $1.00 per share? (Ri): 11.6 . d. If investors become more risk averse, will the expected return for B be higher or lower than 15.5%? HIGHER c. 2. You are given the following information from a market in equilibrium: E(RA) = 15.6%; E(RB) = 12.4%; BA =1.2; BB = 0.8 a. What is the equation of the Security Market Line based on the CAPM? 2 (p =0 b. What is the equilibrium expected return on a portfolio created from 45% A O and 55% B. 13.84 4. c. The estimated expected on a stock C is 14%. If the beta of C is 1.3, is C overvalued or undervalued? Elza 16.9.7 146. = 7 ORV Auto d. Suppose the risk-free rate goes up by 1% (100 basis points), what will be the new expected return for A? ER:2 20.0738 Eira) 11.96. e. If the expected return on the market goes up by 1% (100 basis points) what will be the new expected return for A? ElRide 0.06 (0.15 0.06) i = 0.06 +0.oggi ElRad = 12.3% 3. Suppose asset returns follow a 2-factor APT and you are given the following equilibrium expected rates of return: Security i bzi A E(Ri) 6.6% 12.75% 9.9% bil 0.2 0.3 B C -0.1 0.5 0.6 -0.2 ): What is the equation of the APT? (.06, .075,.09). E(R)-0.06 +0. What is the expected return on a portfolio of B and C with zero sensitivity to factor 1? WB -0.4 WC -0.6 6(Rp) 0.06 +0. 0 0.56 Suppose there is a security, D, with sensitivity of zero to factor 1, and 0.2 to factor 2, and expected return of 9.675%, will you buy it? Why? Eirp), An investor believes that the expected returns above (table) come from the CAPM instead of the APT but agrees with the risk-free rate estimated above. The analyst uses security B to demonstrate his point. What is his estimate of the market portfolio assuming the beta of B is 0.8? rm = 14.44 d. bil bzi 4. Suppose asset returns follow a 2-factor APT and you are given the following equilibrium rates of return: Stock i E(Ri) C 0.208 0.7 1.1 ID 10.145 2 -0. 1 .1 0.216 1.2 0.8 a. What is the equation of the APT? Elmi ) = 6-06 +0.07bi + 0.9 6. Suppose there is portfolio, P, with observed expected return of 15.6%. P has sensitivity of 1.32 to factor 1 and zero sensitivity to factor 2. Is P undervalued or overvalued