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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

Expected Return Volatility Beta

Green Leaf

12%

20%

1.50

NatSam

10%

40%

1.80

HanBel

9%

30%

0.75

Rebecca Automobile

6% 35% 1.20

a. At current market prices, which stocks represent buying opportunities?

b. On which stocks should you put a sell order in?

What are the Alpha % for each stock

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