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Using historical data, you estimate the expected return and beta for Stock A as 9.5% and 1.2, and for Stock B as 14% and 1.8.
Using historical data, you estimate the expected return and beta for Stock A as 9.5% and 1.2, and for Stock B as 14% and 1.8. The expected return of the market portfolio is 9% and the risk-free rate is 5%. If CAPM holds, which stock should you invest in?
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