Use the CAPM/SML equation to estimate the required returns of IBM, JNJ, and Google stocks. Use 11.5% as the required annual market return and the average 3- month T-bill rate of 3.8% as the annual risk-free rate.

Next, choose one stock (IBM, JNJ, or Google) you would like to invest in. Would you like to invest on this stock if you think the expected return is equal to its annualized average return calculated? Explain your answer.

		S&P500		IBM		JNJ		Google	Portfolio
Mean monthly return		0.86%		0.26%		0.86%		1.47%	0.86%
Annualize mean return		10.31%		3.08%		10.28%		17.63%	10.33%
Standard deviation		0.0422		0.0708		0.0470		0.0616	0.0473
Annual standard deviation		0.1461		0.2454		0.1628		0.2135	0.1640
Beta				1.2451		0.6817		1.0250	0.9840