Q5 You expect a RFR of 10% and the market return (RM) of 16%.

	Stock	Beta
	U	0.85
	N	1.25
	D	0.20

1. Compute the expected return for the following stocks and plot them on an SML graph.
2. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information:

	Stock	Current Price	Expected Price	Expected Dividend
	U	22	24	0.80
	N	46	50	2.00
	D	36	40	1.50

Plot your estimated returns on the graph from Part a and indicate what actions you would take regarding these stocks. Explain your decisions.