You have been hired as a junior analyst in a fund. Your boss has asked you to analyze these 6 stocks and choose the best two to add to your portfolio: Tesla, Coca-Cola, Johnson & Johnson, Disney, Amazon, and IBM You will assume for all stocks that the risk-free rate is 4.8% and that the market risk Premium is 5.8%

STEP 1: Find the betas in Yahoo Finance and calculate the required return for the six stocks

STEP 2: Calculate expected return using Yahoo Finance information (1-year Target Est Last price / last price)

STEP 3: Interpret the information: Please decide if the stocks are undervalued or overvalued. Will they be plotting above or below the SML? Which two will you include?

STEP 4: If you think there is going to be a recession, and a high probability that the overall stock market could fall between 15-20%, would you change your decision to other stocks between the 6 possible options?

You can use the Excel uploaded with the Problem Set to help you with your calculation. Please show your work (attach the excel or copy your answers).