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2. Invitro Masters, Inc. has a current stock price of $40, its next year's earnings are expected to be $4. Invitro Masters' shareholders require a 17% rate of return. What is the present value of Invitro Masters' growth opportunities? 5. You invest $5,000 in security A with a beta of .8 and $7,000 in security B with a beta of 1.3. What is the beta of the portfolio you constructed?

8. For a firm with a very recently reported EPS of $2.20, you have estimated that earnings will grow by 8 percent and you have estimated the appropriate P-E (price to expected earnings) ratio to be 17. What should the value of this share be? 9. Given the following two stocks X and Y STOCK EXPECTED RATE OF RETURN BETA X 12 .8 Y 18 2.4

If the expected market rate of return is 13% and the risk-free rate is 5%, what are the alphas for each security, where alpha is defined as the difference between the actually expected and the fair rate of return on the stock? What security would be considered a good buy based upon the equilibrium CAPM model?

12. An investor is in the 28% tax bracket. A corporate bond has a before tax yield of 8%. What is the equivalent tax-exempt yield?

13. A taxpayers in the 28% tax bracket. For this taxpayer, what is the equivalent taxable yield on a municipal bond yielding 7%?