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Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 11% volatility and the risk-free rate
Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 11% volatility and the risk-free rate is 4%.
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 10% 24% 1.26 NatSam 8% 44% 1.63 HanBel 7% 27% 0.86 Rebecca Automobile 6% 28% 1.35
a. At current market prices, which stocks represent buying opportunities?
b. On which stocks should you put a sell order in?
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