Home / Questions / Assume that the CAPM is a good description of stock price returns. The market expected ret
Assume that the CAPM is a good description of stock price returns. The market expected return is 8% with 12% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers, but it does change the expected returns of the following stocks:
| Stock | Expected Return | Volatility | Beta |
| Taggart Transcontinental | 8% | 28% | 1.2 |
| Rearden Metal | 13% | 40% | 1.7 |
| Wyatt Oil | 7% | 20% | 0.8 |
| Nielson Motors | 10% | 32% | 1.3 |
Which of the following stocks represent buying opportunities?
1. Taggart Transcontinental
2. Rearden Metal
3. Wyatt Oil
4. Nielson Motors
a.) 1 only
b.) 2 & 4 only
c.) 1 & 2 only
d.) 2 & 3 only
Dec 02 2019 Read more Less More
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