You've collected the following information for two stocks:

	Stock 1	Stock 2
Beta	0.5	1.6
Dividend yield	7%	1%
Growth rate	4%	8%

The risk-free rate is 2% and the expected return on the market portfolio is 9%.

Part 1

Without doing any calculations, which stock should you buy?

Stock 1, because it has a higher dividend yield

Neither stock

Not enough information provided

Both stocks

Stock 2, because it has a higher beta

Stock 1, because it has a lower beta

Stock 2, because it has a higher growth rate

Part 2

What is the required return for stock 1 based on the CAPM?

Part 3

What is the required return for stock 2 based on the CAPM?

Part 4

Which stock should you buy?

Both stocks

Neither stock

Stock 2, because its required return is greater than stock 1's

Stock 1, because its required return is greater than stock 2's

Not enough information provided