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.
Definitions:
Coronary Artery Disease
A condition characterized by the narrowing of the coronary arteries, resulting in decreased blood flow to the heart.
Angioplasty
A medical procedure used to widen obstructed or narrowed blood vessels, typically to treat arterial atherosclerosis.
Chemotherapy
is a type of cancer treatment that uses one or more anti-cancer drugs as part of a standardized chemotherapy regimen to kill or slow the growth of cancer cells.
Diabetes Mellitus Type II
A chronic condition characterized by high levels of sugar in the blood due to insulin resistance or deficiency.
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