Given: A market with many stocks and one risk$-$free asset. We use the notation for CAPM. We have $\backslash$mu M$=6\%,\backslash$sigma M$=3\%$ and R$=4\%.$

$($a$)$ Two stocks have estimated betas B$1=0\mathrm{.}8$ and B$2=-0\mathrm{.}5.$ Compute $\backslash$mu $\text{'}1=$E$[$S$1]$ and $\backslash$mu $\text{'}2=$E$[$S$2]$ in the context of CAPM.

$($b$)$ With insider information you know the expected returns of the two stocks of part $($a$)$ are $\backslash$mu $1=4\mathrm{.}2\%$ and $\backslash$mu $2=10\%.$ Which stocks should be sold or bought $($relative to the predictions of the CAPM$)?$