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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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