Hie there, please explain the questions step by step, the answers are provided for your checking but please do not copy the answers step by step. Please explain where did the theories and formulas coming from and please make any external references, the key points for these questions is the explanations part rather than the formulas part, thank you!

3. Refer to the following table. which shows risk and return measures for two portfolios. Portfolio Average Standard Beta Rf annual rate of deviation return R I 11% 10% I 0.5 6% 8&P500 I 14% 12% I 1 0 a. Plot portfolio R on the proceeding table relative to the SML. b. Plot portfolio R relative to the capital market line. Plot SML and CML (calculate ER} 4. Wilson is now evaluating the expected performance of two common stocks, Furhman Labs Inc. and Garten Testing Inc. He has gathered the following information: '. The risk free rate is 5% The expected return on the market portfolio is 11.5% The beta of Furhman stock is 1.5 iv. The beta of the Garlen stick is 0.8 Based on his own analysis, Wilson's forecasts of the return on the two stocks are 13.25% for Furhman stock and 11.25% for Garten stock. Calculate the required return for Furhman labs stock and for Garten testing stock. Indicate whether each stock is undervalued fairly valued or overvalued. EU) = 0+ I3 " [EUMI fr] Furhman Labs: E{r) = .05 +1.5 x [.115 -.05]=14.75% Garten Testing: Etr} = .05 + 0.8 X [.115 .05]=10.20% lithe forecast rate of return is less than {greater than) the required rate of return, then the security is overvalued (undervalued). Furhman Labs: Forecast return Required return = 13.25% - 14.75% = -1.50% Garten Testing: Forecast return Required return = 11.25% - 10.20% = 1.05% Therefore, Furhman Labs is overvalued and Garten Testing is undervalued