Consider two stocks. Stock A has a beta of 1.2 and stock B has a beta of 0.9. The expected market return is 8% and the market risk premium is 6%. Your investment advisor has told you that Stock A has a forecast return of 9% and stock B has a forecast return of 7.5%.

A) Calculate the risk-free rate and use the CAPM to calculate expected returns for both stocks.

B) Based on your calculations, would you recommend buying or selling stocks A and B? Provide a brief explanation of your recommendation?

C) Which stock has more total risk? Discuss