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QUESTION 8 Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 12% volatility and the
QUESTION 8 Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 12% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers, but it does change the expected returns of the following stocks: Expected Return 8% 13% 796 10% tility Beta Taggart Transcontinental Rearden Metal 28% 1.2 att Oil 20% Nielson Motors Which of the following stocks represent buying opportunities? 1. Taggart Transcontinental 2. Rearden Metal 3. Wyatt Oil Nielson Motors 1 only 1 & 2 only 2 & 4 only 2 & 3 only
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