Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 2%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks:

Expected Return Volatility Beta Green Leaf 12% 19% 1.36 NatSam 10% 46% 2.15 HanBel 7% 24% 0.88 Rebecca Automobile 5% 34% 1.26

a. At current market prices, which stocks represent buying opportunities?

b. On which stocks should you put a sell order in?

AppendixLO1