Question: Under the CAPM, the relationship between the expected return on a stock (i) and the risk-free rate is _________________, when the correlation [of returns] between

Under the CAPM, the relationship between the expected return on a stock (i) and the risk-free rate is _________________, when the correlation [of returns] between stock (i) and the market portfolio is less than 0.

1 Expected return on stock (i) = risk-free rate

2 Expected return on stock (i) > risk-free rate

3 Expected return on stock (i) < risk-free rate

4 indeterminate (cannot be determined)

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