q5

Ms. Mandeville is considering to buy a house. She has $100,000 as a down payment. Following is the information about Income Tax rate and Mortgage rates. She earns $90,000 per year. She needs $36,000 for basic living per year and is willing to spend remaining portion for mortgages. What is the maximum price of a house she can afford with 30 year mortgages? Suppose the current expected return on the market portfolio (= r_m) 10 percent and the risk tree rate (= r_t) is 5 percent. The expected return, betas. Par value and prices for three stocks are listed below. Which is fairly priced? Which is overpriced? Which is underpriced? She how you reached your conclusion which asset is fairly over or underpriced