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Jane has an interest in buying Gratise, Inc. stock. Having taken Finance 2660, she remembered to use the capital asset pricing model (CAPM) as a

Jane has an interest in buying Gratise, Inc. stock. Having taken Finance 2660, she remembered to use the capital asset pricing model (CAPM) as a way of determining the asset's risk-return relationship. She asked her stockbroker for Gratise's beta coefficient, and after some delay, she was given a number of 0.95. She then referred to some financial print media to determine return values for the DJIA (market) and the 20-year Treasury Bond as 10.0% and 2.0%, respectively. Lastly, after interviewing the CFO at Gratise, she learned that based on Gratise's expected increase in market share and improved operation efficiency, Gratise is expected to provide a return to its shareholders of 10%, per year. Although Jane was a good student at CSU and can probably solve the problem independently, she has sought your assistance in making this investment decision. Should Jane purchase shares of Gratise stock? Explain the reason for your decision with sound financial theory.

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