Question Which stock is the better buy relative to the CAPM? The line through A, B, and C is to show you that they all have the same expected return. SML B RE Beta 1) a 2) b 3) c 4) All are equally valuable Question Assume the CAPM holds. You have a stock that has a beta of 2. If the risk free rate is 4%, and the equity risk premium is 5%(this is the amount above the risk free rate), what must the expected return on this stock be? 1) 14% 2) 10% 3) 16% 4) 18% 5) 22%