. Assume that the historical average rate of return on the market index is 12% and the Treasury Bill rate is 3%. Beta of Stock J is 1.5.

a) Assuming the CAPM holds, what is expected return on stock J if the current Treasury bill rate is 1%?

b) Assume the current share price of stock J is $20. Analysts made recommendations and price estimates for stock J as follows.

Recommendation	One-year price target $	Number of Analysts
Strong Buy	25	4
Buy	23	3
Hold	20.5	1
Sell	18	1
Strong Sell	15	1

Using the analysts forecast, determine expected rate of return on Stock J.

c) Describe the advantages and disadvantages of using history and using analyst forecast to make predictions.