Question: Please answer questions 7-9 please and thank you :) QUESTION 7 The expected return on a stock with a beta of 0.8 is 11%. If

Please answer questions 7-9 please and thank you :)

QUESTION 7 The expected return on a stock with a beta of 0.8 is 11%. If the risk-free rate is 4.5%, what is the market risk premium?

A. 11% B. 7.5% C. 9.28% D. 8.13%

QUESTION 8 A stock has a beta of 1.1 and an expected return of 12%. The risk-free asset currently earns 4%. If a portfolio of the two assets has a beta of 1.65 what is the weight of the stock in the portfolio and expected return of the portfolio?

A. 125%, 14% B. 0%, 4% C. 150%, 16% D. 100%, 12%

QUESTION 9 The expected return for ABC inc. and XYZ inc. according to equity analysts is 13.75% and 10.5%. If the betas for the two stocks is 1.2 and 0.9 respectively, and the return on the market is 11.5 %. Are the stocks over, under, or fairly valued?

A. ABC: fair valued, XYZ: fair valued

B. ABC: Overvalued, XYZ: Overvalued

C. ABC: Undervalued, XYZ: undervalued

D. ABC: Undervalued, XYZ: Overvalued

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