You have observed the following returns over time:					Assume the risk-free rate is 3.55% and the market risk premium is 4.60%.
Year	Stock A	Stock B	Market		INPUT DATA		rRF	3.55%	Market Risk Premium		4.60%
1997	14.000%	15.000%	12.000%		a. What are the betas of Stocks A and B?
1998	11.000%	9.000%	10.000%		bA			bB
1999	-2.500%	5.000%	3.000%
2000	14.000%	7.500%	4.000%		b. What are the required rates of return for Stocks A and B?
2001	20.000%	13.500%	19.000%		rA			rB
2002	21.500%	14.000%	24.000%
2003	22.400%	13.500%	21.000%		c. What is the required rate of return for a portfolio consisting of 40% A and 60% B?
2004	19.900%	14.400%	15.000%		INPUT DATA		wA	40.00%		rp
2005	21.100%	16.700%	12.000%
2006	24.000%	18.800%	18.000%		d. Stock A is trading at a price consistent with the security market line. If your analysis suggests that Stock A will provide a return above the SML, does your analysis suggest that Stock A is undervalued or overvalued? Explain.
2007	26.300%	19.700%	16.000%
2008	25.500%	21.100%	17.000%
2009	22.100%	23.400%	19.000%
2010	13.500%	11.500%	18.000%
2011	6.400%	8.800%	9.000%
2012	-1.100%	4.200%	-3.000%
2013	-4.000%	5.600%	-2.500%
2014	6.500%	6.800%	4.000%
2015	7.400%	8.700%	9.000%
2016	9.900%	9.900%	12.000%