Question
You are analyzing a stock that has a beta of 1.5. The risk-free rate is 3% and you estimate the market risk premium to be
You are analyzing a stock that has a beta of 1.5. The risk-free rate is 3% and you estimate the market risk premium to be 6%. If you expect the stock to have a return of 13% over the next year, should you buy it? Group of answer choices No. This is because you expect to earn a return higher than the fair return implied by CAPM. Yes. This is because you expect to earn a return higher than the fair return implied by CAPM. No. This is because you expect to earn a return lower than the fair return implied by CAPM. Yes. This is because you expect to earn a return lower than the fair return implied by CAPM.
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