Question
The Royal Seattle Investment Club has $100,000 to invest in the equity market. Frasier advocates investing the funds in KSEA Radio with a beta of
The Royal Seattle Investment Club has $100,000 to invest in the equity market. Frasier advocates investing the funds in KSEA Radio with a beta of 1.5 and an expected return of 17.3%. Niles advocates investing the funds in Northwest Medical with a beta of 1.1 and an expected return of 15.8%. The club is split 50/50 on the two stocks. You are the deciding vote, and you cannot pick a split of $50,000 for each stock. Before you vote, you look up the current risk-free rate (the one-year U.S. Treasury bill with a yield of 3.75%). Which stock do you select?
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