Consider the Following Two Stocks,A and B

question 54

Multiple Choice

Consider the following two stocks,A and B.Stock A has an expected return of 10% and a beta of 1.20.Stock B has an expected return of 14% and a beta of 1.80.The expected market rate of return is 9% and the risk-free rate is 5%.Security __________ would be considered a good buy because _________.

• A) A, it offers an expected excess return of 0.2%
• B) A, it offers an expected excess return of 2.2%
• C) B, it offers an expected excess return of 1.8%
• D) B, it offers an expected return of 2.4%

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