Question: please type the answer by computer, so i can see it clearly, thank you!!! You investigated two publicly listed stocks and discovered the following information:

please type the answer by computer, so i can see it clearly, thank you!!!

You investigated two publicly listed stocks and discovered the following information:

please type the answer by computer, so i can see it

Assume that the S&P 500 forecast returns is 15% and the risk-free rate is 5%.

Question: 1(a) According to CAPM, what are the expected returns and alpha of stocks X and Y?

1(b) According to your answers in 1(a), which stock you will invest? Explain.

Stock X Y Beta 0.8 1.4 Forecast returns 12% 26% Standard deviations 11% 27%

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