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The projected rate of return on stocks A and B are 13% and 18%, respectively. Their standard deviations are 11% and 9% respectively. Stock A
The projected rate of return on stocks A and B are 13% and 18%, respectively. Their standard deviations are 11% and 9% respectively. Stock A has beta of 0.5 and Stock B has beta of 1.5. The T-bill rate and the expected rate of return on the S&P/TSX index are 6% and 16%,respectively. If you currently hold a well-diversified passive index portfolio, would you buy any of the two stocks? If yes, which one?
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