Assume your money is invested in U.S Treasury notes yielding 4%. You are considering investing a portion of the money in a stock that has a beta of 1.25 and your best estimate of the stock's likely return over the next year based on your analysis is 12%. The expected return of a market index mutual fund is 10%. Based on what the CAPM suggests the expected return should be for this stock, should you buy the stock or buy the mutual fund if you decide to move money out of treasuries? Risk-free rate Market return Market risk premium Selected stock Expected return Selected stock's Beta Risk Free rate Risk premium (beta adj) CAPM expected return 12.0% (estimate above)