Question $2$

Your broker has developed a list of firms, their betas, and the return he expects

the stock to yield over the next twelve months $($labeled "Expected Return"$).$ You

have estimated that the risk$-$free rate is $5\%$ and the return to the market will be

$12\%.$ Assuming that CAPM is correct, which stock should you purchase?

Anderson, Inc.

Nathan's Bakeries

All of the stocks

Delta Vanlines

Z$-$man Electronics