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You observe the following shares in the market and have calculated their expected returns and Betas. If the risk free rate is currently 4% and

You observe the following shares in the market and have calculated their expected returns and Betas.

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If the risk free rate is currently 4% and the return on the market portfolio is 12%. Which shares should you immediately sell and which shares should you immediately buy? Why? Show your work.

Stock A

Stock B

Stock C

Stock D

Stock Return 17.00% 9.60% 13.50% 12.00% Beta 1.5 0.7 1.3 0.9

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