Problem $2$

a$.$ You expect a risk$-$free rate $($RFR$)$ of $10$ percent and a market return $(R_m)$ of $14$ percent.

Compute the expected return for the following stocks and plot them on an SML graph.

b$.$ You ask a stockbroker what the firm's research department expects for these three stocks. The

broker responds with the following information:

Plot your estimated returns on the graph from part $($a$)$ and indicate what actions you would take

with regard to these stocks. Explain your decisions.