Please assist with the given problems.
The beta coefficient for stock C is bC= .4, whereas that for stock D is bD= -.5. Stock D has a negative indicating that its rate of return rises whenever returns on most other stocks fall.
Question 1. If the risk free rate is 9 percent and the expected rate of return on an average stock is 13 percent, what are the required rates of return on stocks C & D?
Question 2. For stock C, suppose the current price Po is $25; the next expected dividend D1 is $1.50 and the stock's expected constant growth rate is 4 percent. Is the stock in equilibrium? What would happen if the stock was in equilibrium?