Please complete the problems in Excel on this worksheet and . Dont round use four decimal places until the final answer.

1. AA Corporations stock has a beta of 6. The risk-free rate is 2.5% and the expected return on the market is 14.5%. What is the required rate of return on AAs stock?

2. The market and Stock J have the following probability distributions:

Probability r_M r_J

0.2 13% 18%

0.3 9 5

0.5 18 12

Calculate the expected rates of return for the market and Stock J.

3. Suppose you manage a $6 million fund that consists of four stocks with the following investments:

Stock Investment Beta

A $900,000 1.70

B 1,100,000 -0.70

C 1,500,000 1.15

D 2,500,000 0.85

If the markets required rate of return is 12% and the risk-free rate is 3%, what is the funds required rate of return?

4. Boehm Incorporated is expected to pay a $1.50 per share dividend at the end of this year

(i.e. D₁ = $1.50). The dividend is expected to grow at a constant rate of 11% a year. The required rate of return on the stock, r is 15%. What is the estimated value per share of Boehms stock?

5. Nicks Enchiladas Inc. has preferred stock outstanding that pays a dividend of $9.50 at the end of each year. The preferred sells for $92 a share. What is the stocks required rate of return

6. A company currently pays a dividend of $4 per share (D₀= $4). It is estimated that the companys dividend will grow at a rate of 10% per year for the next 2 years, and then at a constant rate of 5% thereafter. The companys stock has a beta of 1.6, the risk-free rate is 4% and the market risk premium is 2%. What is your estimate of the stocks current price?