Question: Problem 1: Assume the CAPM is correct. How should you invest? Do you need more information to answer this question? Which stock has the highest

Problem 1: Assume the CAPM is correct. How should you invest?

Problem 1: Assume the CAPM is correct. How should you invest? Do you need more information to answer this question? Which stock has the highest expected return according to the CAPM? Why? Plot all the stocks and the S&P on the SML. The risk free rate is 2% and the expected return on the market is 10%. What is the expected return on the portfolio in (d) using historical information instead of the CAPM? CL has a higher standard deviation than HNZ. Is this consistent with the CAPM? Why or why not? Problem 1: Assume the CAPM is correct. How should you invest? Do you need more information to answer this question? Which stock has the highest expected return according to the CAPM? Why? Plot all the stocks and the S&P on the SML. The risk free rate is 2% and the expected return on the market is 10%. What is the expected return on the portfolio in (d) using historical information instead of the CAPM? CL has a higher standard deviation than HNZ. Is this consistent with the CAPM? Why or why not

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