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Consider the following two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.20. Stock B has an
Consider the following two stocks, A and B. Stock A has an expected return of 10% and a beta of 1.20. Stock B has an expected return of 14% and a beta of 1.80. The expected market rate of return is 996 and the risk-free rate is 5 % . would be considered a good buy because Stock A, it offers an expected excess return off 0.2 % Stock A, it offers an expected excess return of 2.2% Stock B, it offers an expected excess return of 1.8 % Stock B, it offers an expected return of 2.4 %
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