Question: Consider the following stocks with beta and expected return: Stock Beta Expected Return A 0.5 7.8% B 1.2 14.2% C 1.5 15.7% D 1.8 19.6%

Consider the following stocks with beta and expected return:

Stock

Beta

Expected

Return

A

0.5

7.8%

B

1.2

14.2%

C

1.5

15.7%

D

1.8

19.6%

The T-bill rate is 4%, and the expected return on the market portfolio is 12%. Which stock(s) would be a good buy? Explain why.

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