Use the following information to evaluate whether or not you should buy stock A.

Stock A S&P 500

Probability Return Probability Return

0.1 -100% 0.3 -30%

0.2 -10% 0.4 15%

0.6 18% 0.3 40%

0.1 130%

The current yield on the 10-year Treasury Note (risk-free rate) is 3.3%. The correlation between Stock A and the market is 0.53.

Hint One Remember that the S&P 500 represents the market and that you can use the two probability distributions above to get the expected return and standard deviation for both Stock A and for the market (round calculations to 2 decimal places in percentage terms).

Hint Two You will use the SML to get the required return and you will need to calculate beta from the data provided (round beta to two decimal places).