The expected return on the market is 10% and the risk free rate is 3%. If the CAPM is correct, which of the following stocks would be a good investment?

Stock 1: Beta= 1 and expected return=15%

Stock 2: Beta= 1.35 and expected return=11%

Stock 3: Beta= 0.85 and expected return=7%

		Stock 2 only
		Stock 1 only
		Stocks 1 and 3
		Stocks 1 and 2