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Consider the following information describes the expected return and risk relationship for three stocks: Beta Expected Return Standard Deviation Lasco Foods 12.95% 22% 1.4 16%

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Consider the following information describes the expected return and risk relationship for three stocks: Beta Expected Return Standard Deviation Lasco Foods 12.95% 22% 1.4 16% 12% 0.95 Grace Manufacturing Wysinco Ltd. Market Risk Premium 11% 9% 0.75 8% Risk Free Rate 10% a) Using CAPM, calculate the Expected Return for each Stock. (15 Marks) b) As an investment advisor, which stock will you recommend for investment and why? (5 Marks) (20 marks)

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