Directions: Answer the following questions on a separate document. Explain how you reached the answeror show your work if a mathematical calculation is needed, or both.Use the following information for questions 1 through 8:The Goodman Industries’ and Landry Incorporated’s stock prices and dividends, along with the MarketIndex, are shown below. Stock prices are reported for December 31 of each year, and dividends reflectthose paid during the year. The market data are adjusted to include dividends.Goodman Industries Landry Incorporated Market IndexYear Stock Price Dividend Stock Price Dividend Includes Dividends2013 $25.88 $1.73 $73.13 $4.50 17.49 5.972012 22.13 1.59 78.45 4.35 13.17 8.552011 24.75 1.50 73.13 4.13 13.01 9.972010 16.13 1.43 85.88 3.75 9.65 1.052009 17.06 1.35 90.00 3.38 8.40 3.422008 11.44 1.28 83.63 3.00 7.05 8.961.Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, andthen calculate average annual returns for the two stocks and the index. (Hint: Remember, returnsare calculated by subtracting the beginning price from the ending price to get the capital gain orloss, adding the dividend to the capital gain or loss, and then dividing the result by the beginningprice. Assume that dividends are already included in the index. Also, you cannot calculate therate of return for 2008 because you do not have 2007 data.)2. Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index.(Hint: Use the sample standard deviation formula given in the chapter, which corresponds to theSTDEV function in Excel.)3. Estimate Goodman’s and Landry’s betas as the slopes of regression lines with stock return on thevertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: Use Excel’s SLOPEfunction.) Are these betas consistent with your graph?4. The risk-free rate on long-term Treasury bonds is 6.04%. Assume that the market risk premium is5%. What is the required return on the market using the SML equation?5. If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, whatwould be its beta and its required return?6. What dividends do you expect for Goodman Industries stock over the next 3 years if you expectyou expect the dividend to grow at the rate of 5% per year for the next 3 years? In other words,calculate D1, D2, and D3. Note that D0 = $1.50.7. Assume that Goodman Industries’ stock, currently trading at $27.05, has a required return of13%. You will use this required return rate to discount dividends. Find the present value of thedividend stream; that is, calculate the PV of D1, D2, and D3, and then sum these PVs.8. If you plan to buy the stock, hold it for 3 years, and then sell it for $27.05, what is the most youshould pay for it?Use the following information for Question 9:Suppose now that the Goodman Industries (1) trades at a current stock price of $30 with a (2) strike priceof $35. Given the following additional information: (3) time to expiration is 4 months, (4) annualized riskfreerate is 5%, and (5) variance of stock return is 0.25.9. What is the price for a call option using the Black-Scholes Model?