1. You expect an RFR of 8 percent and the market return (R_M) of 14 percent. Compute the expected return for the following stocks. Round your answers to two decimal places.

   Stock	Beta		E(Ri)
   U	0.70		%
   N	1.15		%
   D	-0.30		%

   Choose the correct SML graph.

   The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 4 .

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   B.
   C.
   D.

2. You ask a stockbroker what the firms research department expects for these three stocks. The broker responds with the information below. Indicate what actions you would take with regard to these stocks. Round your answers to two decimal places.

   Stock	Current Price	Expected Price	Expected Dividend	Estimated Return	Evaluation
   U	30	32	1.05	%	-Select-UndervaluedProperly valuedOvervaluedItem 6
   N	46	49	2.15	%	-Select-UndervaluedProperly valuedOvervaluedItem 8
   D	40	44	1.30	%	-Select-UndervaluedProperly valuedOvervaluedItem 10

   If you believe the appropriateness of these estimated returns, you would buy -Select-stock Ustock Nstock Dstocks U and Nstocks U and Dstocks N and DItem 11 and sell -Select-stock Ustock Nstock Dstocks U and Nstocks U and Dstocks N and DItem 12 .

   Choose the correct SML graph. Note that labels with asterisk denote estimated returns.

   The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 13 .

   A.
   B.
   C.
   D.