$\backslash$table$[[$Asset$,$SInvested,Expected Return,Beta$],[$Andy$,$$$25,000,12\mathrm{.}00\%,1\mathrm{.}10],[$Betty$,$$$75,000,7\mathrm{.}00\%,0\mathrm{.}80]]$

$R_f=$ Risk$-$free rate $,3\mathrm{.}50\%,R_M=$ Market Return $=11\mathrm{.}00\%$

$R{R}_1=R_1+{}_1(R_M-R_1)$

$E{R}_p=W_{A}E{R}_A+W_{B}E{R}_B+$dotsdots

${}_p=W_A{}_A+W_B{}_B+$dotsdots

Note:

Under Priced $($delivers more than required$)$ when: Expected Return $($ER$)>$ Required Return $($RR$)$ Fairly Priced when: Expected Return $($ER$)=$ Required Return $($RR$)$

Over Priced $($delivers less than required$)$ when: Expected Return $($ER$)$ Required Return $($RR$)$

Caution: Set your calculator to $4$ decimal points

Questions:

What is Andy's required return?

Is Andy's stock underpriced, overpriced, or fairly priced?

What is Betty's required return?

Is stock Betty: Underpriced, Overpriced or Fairly priced?

What is the ${}_p$ of the EMU portfolio $($Stock Andy $+$ Stock Betty$)?$

What is the Expected Return ERp of the EMU portfolio?

What is the required return $R_p$ of the EMU portfolio?

Is EMU portfolio a good, fair, or poor buy considering the portfolio risk?

Which is the least risky stock to add to the EMU portfolio? $($Assume returns are the same$)$

Dexter: $=1\mathrm{.}4,{}_{\text{r}\text{e}\text{t}\text{u}\text{r}\text{n}}=30\%$

Saline: $=1\mathrm{.}2,{}_{\text{r}\text{e}\text{t}\text{u}\text{r}\text{n}}=40\%.$

Which would be the best to add to the EMU portfolio? $($Assume returns are the same$)?$

Novi:

Std$.$ Dev ${}_{\text{r}\text{e}\text{t}\text{u}\text{r}\text{n}}=15\%$

Correlations: ${}_{\text{e}\text{m}\text{u}\text{,}\text{n}\text{o}\text{v}\text{i}}=,+0\mathrm{.}40$

Dearborn: Std Dev ${}_{\text{r}\text{e}\text{t}\text{u}\text{r}\text{n}}=35\%,$ Correlations ${}_{\text{e}\text{m}\text{u}\text{,}\text{d}\text{e}\text{a}\text{r}\text{b}\text{o}\text{r}\text{n}}=-0\mathrm{.}15$