Assume that the CAPM is a good description of stock price returns.The market expected return is 8% with 12% 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 returns of the following stocks:

Stock Expected Return Volatility Beta

Taggart Transcontinental 8% 28% 1.2

Rearden Metal 13% 40% 1.7

Wyatt Oil 7% 20% 0.8

Nielson Motors 10% 32% 1.3

Which of the following stocks represent buying opportunities?

1.Taggart Transcontinental

2.Rearden Metal

3.Wyatt Oil

4.Nielson Motors

a 2 & 3 only

b 1 only

c 2 & 4 only

d 1 & 2 only