PLEASE KINDLY ANSWER ME THIS PRACTICE QUESTIONS

Alan, a chartered financial analyst (CFA), is willing to invest two stocks, Yoyo stock and Zizi stock. He has collected the data on both stocks from Bursa Malaysia. The data as follows:

		Stock Yoyo	Stock Zizi
State of Economy	Probability	Return (%)	Return (%)
Recession	0.35	19	31
Normal	040	28	24
Boom	0.25	23	17

The beta for Yoyo stock and Zizi stock are 1.5 and 1.15 respectively. Alan plan to invest RM50,000, RM290,000 in Yoyo stock and the remainder in Zizi stock. Yoyo stock is preferred stock while Zizi stock is a common stock. The treasury bills rate is at 1.75% and the market risk premium is 8%.

Yoyo stock dividend is RM1.20 per share and Zizi stock recently paid dividend is RM2.20 and the growth rate of dividend for Yoyo is 8% and Zizi is 7%. Market price for Yoyo is RM14 and Zizi is RM24. Alan added another 2 stocks which are Bloom stock and Stars Stock. He distributed his portfolio as 20% in Yoyo, 30% in Zizi, 15% in Bloom and the remainder in Stars. Beta for Bloom and Stars are 0.8 and 1.2. Bloom expected return less 2.5% than Zizi expected return and Stars expected return is 15%.

Bloom stock dividend expected to pay RM 0.50 per share and Stars dividend has just paid RM0.35 per share. Market price for Bloom is RM45 per share and Stars market price is RM5 per share.

Required:

1. Calculate the expected return for Yoyo and Zizi stocks.

2. Plot the SML either on the graph paper or by type. Find the slope and the risk premium from the graph and calculation.

3. Evaluate all the four stocks according to the CAPM method.

4. Evaluate all the four stocks according to the dividend discounted model (DDM).