The common stock of Flavorful Teas has an expected return of 14.4%. The return on the market is 10% and the risk-free rate of return is 3.5%. What is the approximate value for the beta of this stock? Solution: 1.68 so :

Mr. Blue Monday, a stock broker, encourages Ralph to buy stock in Flavorful Teas (see above). He reasons that though Ralph owns no other risky asset, the good return risk relationship will serve Ralph well. Base your argument on systematic and unsystematic risk, is this good advice?