1. You are trying to decide whether to purchase stock or not. The stock is currently sold for $43.54 and is expected to be $46.50 in a year. A dividend of $1.50 per share will be distributed during the year. The stock has a beta of 1.25. The risk-free rate is 3%, and the expected return on the market is 10%. Based on the information, should you buy the stock?

   • Yes, because the expected return of the stock is above the SML.
   • No, because the expected return of the stock is below the SML.
   • Yes, because the expected return of the stock is below the SML.
   • No, because the expected return of the stock is above the SML.