Question: Here's some data on two stocks from Jan 2006 to December 2010 (annualized rates): SD(Ri ) i Your Mom Inc. (YMI) SD(Rj) = 24.9% Beta

Here's some data on two stocks from Jan 2006 to December 2010 (annualized rates): SD(Ri ) i

Your Mom Inc. (YMI) SD(Rj) = 24.9% Beta = 1.09

Mr mining co (MMC) SD(Rj) = 30.7% Beta = 0.40

Please use the CAPM model and assume that

the expected return on the market E[RM], = 9% and the risk-free rate rf = 3%,

Please calculate the market's required return on each stock. Why is E[YMI] > E[MMC] when SD(MMC) > SD(YMI)?

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