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Nishikori is now evaluating the expected performance of 2 common stocks. AOA Labs Inc and YLC Inc. He has gathered the following information: The risk-free
Nishikori is now evaluating the expected performance of 2 common stocks. AOA Labs Inc and YLC Inc. He has gathered the following information:
The risk-free rate is 4%
The expected return on the market portfolio is 12%
The beta of AOA Labs Inc stock is 1.7
The beta of YLC Inc stock is 0.7
Based on his own analysis, Nishikoris forecasts of the returns on the stocks are 13.5% for AOA Labs Inc and 11% for YLC Inc stock. Calculate the required rate of return for AOA Labs Inc stock and YLC Inc stock. Which investment is better?
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