The following questions are about risk-return and applications. Provide a brief explanation for each question, no credit will be given without explanation. Type up and submit your answers here, do not attach any file. 1. Assume the risk-free rate is 5% and the S\&P 500 index return is 10%. AA stock's systematic risk is represented by a beta of 1.2 . a. What is your required rate of return? b. If after investing in the stock, you earned 15\% rate of return, was the stock overpriced or underpriced at the time of your purchase? 2. You have estimated the beta of BM stock at 1.60. If you purchase the stock today and sell one year later, the rate of return you have is 18% while S\&P 500 goes up 10%. Do you overpay for the investment? 3. AA stock price is $45/ share. The stock is expected to pay dividends $2.50 in the coming year. After reviewing all information, you concluded: the price one year from now will be $50/ share and you required a 10% rate of return for investing in this stock. What is the maximum price you are willing to pay today