Using data for 2021, suppose a researcher analyzes mutual fu…

Using data for 2021, suppose a researcher analyzes mutual fund returns and estimates each fund’s alpha use the Fama-French three factor model.  The researcher then ranks these funds from highest alpha to lowest and splits the funds into quintiles with the top quintile generating the highest alphas and the bottom quintile generating the lowest alphas.  The researcher then measures the alphas of these funds in 2022. Provide an interpretation of the evidence about market efficiency and persistence in performance based on the graph below. (10 points)

The yield on T-bills is 4.5% and the risk premium on a portf…

The yield on T-bills is 4.5% and the risk premium on a portfolio with beta=1 is 9%.  According to the capital asset pricing model: a) What would be the expected return on a zero-beta stock? (3 points) b) You purchased a stock at a price of $85. The stock is expected to pay a dividend of $2.00 next year and you forecast that you can sell the security for to sell then for $95. The stock risk has been evaluated at β = 1.50. i. Using the SML, calculate the expected rate of return for the stock. (3 points) ii. Calculate the expected rate of return, using the expected price and dividend for next year. (3 points) iii. Is the stock overpriced or underpriced? By how much? (3 points)