Question: Jay is reviewing his portfolio of investments which include certain
Jay is reviewing his portfolio of investments, which include certain stocks and bonds. He has a large amount tied up in U.S. Treasury bills paying 3%. He is considering moving some of his funds from the T-bills into a stock. The stock has a beta of 1.25. If Jay expects a return of 14% from the stock (a little better than the current market return of 13%), should he buy the stock or leave his funds in the T-bill?
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