The risk-free rate is 7%. The expected market rate of return is 15%. If

you nd a stock with a beta of 1.3 is expected to oer a rate of return

of 12%, as qualify for a skillful fund manager, you should:

A. sell the stock short because you will earn negative alpha by shorting the stock.

C. buy the stock because it will generate positive alpha.

D. buy the stock because the stock will generate negative alpha.

E. sell short the stock because the stock will generate negative alpha .