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7. (15 points) Consider the following stocks with beta and expected return: Stock Beta Expected Return A 0.5 7.8% B 1.2 14.2% C 1.5 15.7%
7. (15 points) Consider the following stocks with beta and expected return:
| Stock | Beta | Expected Return |
| A | 0.5 | 7.8% |
| B | 1.2 | 14.2% |
| C | 1.5 | 15.7% |
| D | 1.8 | 19.6% |
The T-bill rate is 4%, and the expected return on the market portfolio is 12%. Which stock(s) would be a good buy? Explain why.
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