1. Assuming you believe the CAPM would you prefer a stock that has an estimated future annual Treynor measure of 5 or a bond that has an estimated annual excess return of 0.99% while its Beta was 0.66? You may assume that US treasuries are yielding 0.5% per year.

A) There is no difference between these investments choices

B) The stock would be preferred as it has a higher rates or return

C) The bond would be preferred as it has a higher estimated alpha

D) There is no method to make a comparison as the CAPM cannot be applied to fixed income securities

E) A portfolio that is equally weighted between these two securities would be most preferred as it would diversify away some Beta risk