You are given the following information about a set of stocks:

Stock Beta

Boeing 0.95 Chrysler 1.25 Intel 1.15 Wal-Mart Stores 1.05

Expected Returns

14% 21% 27% 8.5%

The risk-free rate of return is 5.5% and the return on the market portfolio is 16.5%.

a) Determine the beta of a portfolio Q consisting of equal investments in the four stocks.

b) What is the required rate of return on portfolio Q?

c) What is the expected rate of return on Portfolio Q?

d) Evaluate whether the portfolio Q is overvalued, undervalued, or correctly valued. Repeat for

each of the individual stocks