Please see attached Chapter 6 Homework Problems document.

*PLEASE WORK OUT ALL SOLUTIONS IN EXCEL WITH FORMULAS IN CELLS*

*PLEASE WORK OUT ALL SOLUTIONS IN EXCEL WITH FORMULAS IN CELLS* 6-1 Your investment club has only two stocks in its portfolio. $20,000 is invested in a stock with a beta of 0.7 and $35,000 is invested in a stock with a beta of 1.3. What is the portfolios beta? 6-2 AA Industries's' stock has a beta of 0.8. The risk free rate is 4% and the expected return on the market is 12%. What is the required rate of return on AA's stock? 6-3 Suppose that the risk free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stcok with a beta of 1.0, and (3) a stock with a beta of 1.7? Assume that the risk free rate is 5% and that the market risk premium is 7%. 6-7 Suppose rRF = 5%, rM = 10%, and rA = 12% a. Calculate Stock A's beta. b. If Stock A's beta were 2.0, then what would be A's new required rate of return? 6-8 As an equity analyst you are concerned with what will happen to the required return to Universal Toddler Industries's stock as market conditions change. Suppose rRF = 5%, rM = 12%, and bUTI = 1.4. a. Under current conditions, what is rUTI, the required rate of return on UTI stock? b. Now suppose rRF (1) increases to 6% or (2) decreases to 4%. The slope of the SML remains constant. How much this affect rM and rUTI? c. Now assume rRF remains at 5% but rM (1) increases to 14% or (2) falls to 11%. The slope of the SML does not remain constant. How would these changes affect rUTI? 6-10 Suppose you manage a $4 Million fund that consists of four stocks with the following investments: Stock A B C D Investment Beta $400,000 1.50 $600,000 -0.50 $1,000,000 1.25 $2,000,000 0.75 If the market's required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return? 6-14 You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio's new beta be after these transactions