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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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