Need help with the following:

Work should be submitted in Excel usingappropriateExcelfunctions and formulas.Each problem should be professionally presented on a separate, named tab within the submitted Excel file.

Chapter 8 problems:

3. You are evaluating various investment opportunities currently available and you have calculated

expected returns and standard deviations for five different well-diversified portfolios

of risky assets:

Portfolio Expected Return Standard Deviation

Q 7.8% 10.5%

R 10.0 14.0

S4.65.0

T11.718.5

U 6.27.5

a. For each portfolio, calculate the risk premium per unit of risk that you expect to receive

([E(R) RFR]/). Assume that the risk-free rate is 3.0 percent.

b. Using your computations in Part a, explain which of these five portfolios is most likely to

be the market portfolio. Use your calculations to draw the capital market line (CML).

c. If you are only willing to make an investment with = 7.0%, is it possible for you to

earn a return of 7.0 percent?

d. What is the minimum level of risk that would be necessary for an investment to earn

7.0 percent? What is the composition of the portfolio along the CML that will generate

that expected return?

e. Suppose you are now willing to make an investment with = 18.2%. What would be

the investment proportions in the riskless asset and the market portfolio for this portfolio?

What is the expected return for this portfolio?

5. Based on five years of monthly data, you derive the following information for the companies

listed:

Company ai ( Intercept) i r iM

Intel 0.22 12.10% 0.72

Ford0.10 14.600.33

Anheuser Busch 0.17 7.600.55

Merck0.0510.200.60

S&P 500 0.00 5.50 1.00

a. Compute the beta coefficient for each stock.

b. Assuming a risk-free rate of 8 percent and an expected return for the market portfolio

of 15 percent, compute the expected (required) return for all the stocks and plot them

on the SML.

c. Plot the following estimated returns for the next year on the SML and indicate which

stocks are undervalued or overvalued.

Intel20 percent

Ford15 percent

Anheuser Busch19 percent

Merck10 percent

6. The following are the historic returns for the Chelle Computer Company:

YearChelle Computer General Index

13715

29 13

3 11 14

4 89

511 12

6 49

Based on this information, compute the following:

a. The correlation coefficient between Chelle Computer and the General Index.

b. The standard deviation for the company and the index.

c. The beta for the Chelle Computer Company.