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Question $32(5$ points$)$

Diana is reviewing her portfolio of investments, which includes certain bonds and stocks. She has a large amount of her funds tied up in Government of Canada Treasury bills paying $5\%.$ She is considering moving some of her funds from the Tbills into a stock. The stock is $50\%$ more volatile than the overall market. Based on their calculations, some analysts are calling for this stock to return a rate of $18\%$ for the coming year. The market consensus is that the S&P$/$TSX index will yield a $15\%$ return in $2024.$ According to CAPM, should Diana buy this stock or leave her funds in T$-$bills? Justify your answer with some numbers. You are also asked to explain to Diana whether a stock is more, less than, or equally risky as a mutual fund with the same beta and why.

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