Problem 7-04 Based on five years of monthly data, you derive the following information for the companies listed: Company Intel a; (Intercept) 0.23 12.20% 0.72 Ford 0.13 14.20 0.30 Anheuser Busch 0.19 8.70 0.52 Merck S&P 500 0.04 0.00 10.30 6.00 0.72 1.00 a. Compute the beta coefficient for each stock. Do not round intermediate calculations. Round your answers to three decimal places. Intel: Ford: Anheuser Busch: Merck: b. Assuming a risk-free rate of 8 percent and an expected return for the market portfolio of 13 percent, compute the expected (required) return for all the stocks. Do not round intermediate calculations. Round your answers to two decimal places. Intel: % Ford: % Anheuser Busch: Merck: % % c. Choose the correct SML graph for the following estimated returns for the next year. Intel 18 percent Ford 16 percent Anheuser Busch - 18 percent Merck - 11 percent The correct graph is -Select- A. E(Ri) Security market Line *AB 0.18- 0.16 Ford' 0.14 Rm 0.12. 0.1 0.08 0.06. 0.04 0.02 *Merck' SML -0.2 0.2 0.4 0.6 0.8 1.2 14 1.6 1.8 Beta B. E(Ri) Security market Line 0.18- *AB 0.16- *Ford' 0.14- Rm 0.12- 0.1 -0.08 0.06. -0.04 -0.02- -0.2 0.2 0.4 0.6 0.8 tH: *Merck' Intel' SML 1.2 1.4 1.6 1.8 Betal C. E(Ri) 0.18 Security market Line *AB 0.16. *Intel' Rm0.14 0.12 0.1 0.08 0.06 0.04 0.02 *Merck' SML Ford' -0.2 0.2 0.4 0.6 0.8 1.2 1.4 1.6 1.8 Beta D. E(Ri) Security market Line 0.18- Merck' 0.16 *Intel' 0.14 Rm0.127 0.1 0.08. 0.06- 0.04 0.02 -0.2 *AB *Ford' SML 0.2 0.4 0.6 0.8 1.2 14 1.6 1.8 Betal Which stocks are undervalued or overvalued? Company Intel Ford Anheuser Busch Merck Evaluation -Select- Undervalued Overvalued -Select-