Assume: $r_{rf}=5\%,r_m=7\%,$ and you are considering owning a stock with a beta of $1\mathrm{.}2$ and an expected return of $7\mathrm{.}6\%.$

If you had a fully diversified portfolio you would

keep the stock if you had it and purchase it if you did not

keep the stock if you had it but not purchase it if you did not

not purchase the stock and sell it if you had it

$$ not purchase the stock but would keep it if you had it