Risk-free rate of return:4.25%

Beta of Stock Z:1.50

Market return:12%

Average return of Stock Z:14.75%

Given the above information, if an investor's required rate of return is 16.25%, determine whether an investment in Stock Z will be warranted.

A)

Yes, because the expected rate of return exceeds the risk-adjusted return on Stock Z.

B)

Yes, because the average rate of return on Stock Z is very impressive.

C)

No, because the beta on Stock Z is 50% greater than the overall market.

D)

No, because the investor's required rate of return exceeds the expected rate of return on Stock Z.