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Stock X has a high beta and a high expected return. Stock Y has a low beta and a low expected return. If the market

Stock X has a high beta and a high expected return. Stock Y has a low beta and a low expected return. If the market is efficient and if CAPM holds, which stock would a well-diversified investor prefer to buy?

A. Stock X.

B. Stock Y.

C. She is indifferent.

D. It depends on the price of each stock.

E. It depends on her risk tolerance.

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