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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
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 3%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks: a. At current market prices, which stocks represent buying opportunities? b. On which stocks should you put a sell order in? Complete the table with the alphas below: (Round to one decimal place.) Expected Return Beta Alpha Volatility 20% Green Leaf 12% 1.50 % NatSam 10% 40% 1.80 % HanBel 9% 30% 0.75 % Rebecca Automobile 6% 35% 1.20 %
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