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Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. According to Capital Asset Pricing

Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. According to Capital Asset Pricing Model (CAPM), which of the following statements is CORRECT?

A

B

Beta

1.10

0.90

a. Stock A must have a higher expected return than Stock B.

b. Stock A must have a lower expected return than Stock B.

c. The expected return of Stock A is equal to that of Stock B.

d. None of the above is correct.

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