Question 1 (50 points)

Use the DATA in the attached file that includes the prices of stocks traded on NEW YORK STOCK EXCHANGE(NYSE)and the MARKET INDEX (NYSE Composite Index) to calculate the following:

a- Calculate the beta for the four stocks

b- Calculate the portfolio beta of the two first stocks in the data sheet (to determine the weights weight for stock one (w1) = the two last decimals of your ID and weight stock 2(w2) =the rest). If your ID ends with 55 then the weight for the first stock is = 55% and the weight for the second stock is the rest.

c- Rank the Betas in (a) and (b) from least risky to riskiest. Which one will you choose. Explain your answer.

d- Calculate the required rate of return for the four stocks and the portfolio of the two stocks with the weights in question b using the Capital Asset Pricing Model(CAPM). Note: The 3 months USD T-bill rate in Egypt is 5.5%, 3 months T-bill rate in US is 4.52%, 9 months T-bill rate US is 6.82%.

e- Explain the relation between the required rate of return and the beta based on your results in d?

Table attached below