1) The following two stocks are available for purchase. Utilize this information to answer questions A thru J. (10 points) E(R) Stock A Stock B State plo E(Ra) E(Rb) Recession 20% -30% -20% Normal 50% 10% 10% Expansion 30% 30% 20% Beta 1.8 1.2 Rf 3% RM 5% A) What is the expected return on Stock A & Stock B? B) What is the standard deviation of Stock A & Stock B? C) With a mix of 60% Stock A and 40% Stock B what is the portfolio return? D) What would the mix of the two stocks be to have a portfolio return of 7.5%? E) If you were trying to minimize your portfolio risk what would be your mix of the two stocks? F) Which of the two stocks has higher total risk? G) Which of the two stocks has a higher Reward-to-Risk Ratio? H) What return would you expect on each stock based on the Capital Asset Pricing Model? 1) Are the two stocks under or over-valued based on the Capital asset Pricing Model? J) What mix of the two stocks would you choose? 2) Karen's car parts company common stock has a beta of 1.2. If the risk free rate is 3.3% and the expected return in the market is 12%. What is the company's cost of equity? (10 points) 3) Jack's Farm Park issued a 20-year, 5.8% quarterly bond 5 years ago. The bond currently sells for 95% of its face value. The company's tax rate is 21%. What is the pre-tax and after-tax cost of debt? (10 points) 4) Karen's insurance company has a capital structure of 45% debt, 15% preferred stock and 40% common stock. Its cost of equity is 12%, the cost preferred stock is 8%, and its cost of debt is 4%. The company's tax rate is 21%. What is the after-tax WACC? (10 points) 5) Sam is considering taking one long trip where she will go from the USA to Mexico (MXP) and then to Italy and then to Britain (GBP). If she starts with $5,000 USD, how many MXP will she receive, without a currency exchange fee? While in Mexico Denise spends 30,000 MXP, how many Euros will she receive when she arrives in Italy? If she spends 1,000 Euros in Italy, then how many GBP will she receive when she converts her money into GBP, without a currency exchange fee? If /Sam spends 1000 GBP while in Britain, how many USD will she receive when she converts her money back into USD, without a currency exchange fee? (10 points)