Given the Following Information on 3 Stocks

question 43

Essay

Given the following information on 3 stocks:
Using the CAPM, calculate the expected return for Stock's A, B, and
C. Which stocks would you recommend purchasing?
BA = .0070/.0064 = 1.094; ra = .07 + (.18-.07)1.094 = .1903
BB = .0045/.0064 = 0.703; rb = .07 + (.18-.07)0.703 = .1473
BC = .0013/.0064 = 0.203; rc = .07 + (.18-.07)0.203 = .0923
Indifferent on A as .1903 _.19.
Would buy B as.15 > .1473.
Would not buy C as.09 < .0923.

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Definitions:

Premature

Occurring or done before the usual or proper time; too early.

Incubator

A device providing controlled environmental conditions for the care and growth of premature babies or the cultivation of microbiological cultures.

Neonatal ICU

A specialized unit within a hospital dedicated to the intensive care of ill or premature newborn infants.

Attachment

An emotional bond between individuals, particularly between a child and caregiver, which is critical for the child's development and psychological security.