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Assume that you are currently holding a well-diversified portfolio, which of the three stocks would be a good candidate to include in a well-diversified portfolio?
Assume that you are currently holding a well-diversified portfolio, which of the three stocks would be a good candidate to include in a well-diversified portfolio? (you are well-diversified investor). Hint: a well-diversified investor does not concern about unique risk but the market risk which is measured by beta?
Please provide an answer to the above question in detail explaining why you selected the stock.
Stock | CAPM Return (Need to Calculate) | >, =, < | Average Returns | Over/Under/Correctly Priced | Recommendations |
(From Table 1) | (Buy/Sell) | ||||
Walmart | 62.7778 | < | 80.8100 | Underpriced | Buy |
Mcdonalds | 56.3273 | < | 104.3800 | Underpriced | Buy |
Costco | 88.9870 | < | 131.5700 | Underpriced | Buy |
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