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KarenKay,aportfoliomanageratCollinsAssetManagement,isusingthe capital asset pricing model for making recommendations to her clients. Her research department has developed the information shown in the following exhibit. Forecast Returns,

KarenKay,aportfoliomanageratCollinsAssetManagement,isusingthe capital asset pricing model for making recommendations to her clients. Her research department has developed the information shown in the following exhibit.

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Forecast Returns, Standard Deviations, and Betas Forecast Return Standard Deviation Beta Stock X 14.0% 36% 0.8 Stock Y 17.0 25 1.5 Market index 14.0 1 5 1 .0 Risk-free rate 5.0

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