An industrial firm has a beta of $1\mathrm{.}4.$ Based on historical data you estimate the market risk premium to be $8\mathrm{.}5\%$ and the current risk$-$free rate is $5\%.$

a$.$ Using the CAPM, what is the expected return on the stock for this industrial firm?

b$.$ Assume that that the average return over the past year was $18\%.$ Should you take a long or a short position in the stock to improve your portfolio?

c$.$ Now assume that that the average return over the past year was $15\%.$ Should you take a long or a short position in the stock to improve your portfolio?