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You are analyzing a stock that has a beta of 1.15. The risk-free rate is 4.2% and you estimate the market risk premium to be
You are analyzing a stock that has a beta of 1.15. The risk-free rate is 4.2% and you estimate the market risk premium to be 7.4%. If you expect the stock to have a return of 12.5% over the next year, should you buy it? Why or why not? The expected return according to the CAPM is % (Round to two decimal places.) Should you buy the stock? (Select the best choice below.) O A. No, because the expected return based on the beta is greater than the return on the stock. O B. Yes, because the expected return based on the beta is equal to or less than the return on the stock
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