Suppose the rate of return on US Government bonds is 2.96%. Baffledo Inc. stock has a correlation with the overall stock market of 0.40, and a CAPM Beta of 1.25, and investors require a return of 14.95% on Baffledo stock. A. Does Baffledo tend to move in the same direction as the market, or tend to move in the opposite direction of the market? How can you tell? B. Does Baffledo always move in the same/opposite direction as the market? How can you tell? C. Is Baffledo more or less risky than the market overall? How can you tell? D. What is investors required or expected rate of return on the market? 5 E. Suppose Baffledo faces a 30% corporate tax rate. What is Baffledo (aftertax) cost of equity? F. Gordetta, Inc. has a CAPM beta of 0.60. What rate of return do investors require or expect on Gordetta stock?