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Your broker has developed a list of firms, their betas, and the return he expects the st over the next twelve months (labeled "Expected Return"). You have estimated that the rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, w should you purchase? Firm Anderson, Inc. Delta Vanlines Nathan's Bakeries Z-man Electronics Beta Expected Return 0.90 10.5% 1.25 13.0 % 1.60 16.0% 1.90 19.0%

Your broker has developed a list of firms, their betas, and the return he expects the st over the next twelve months (labeled "Expected Return"). You have estimated that the rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, w should you purchase? Firm Anderson, Inc. Delta Vanlines Nathan's Bakeries Z-man Electronics Beta Expected Return 0.90 10.5% 1.25 13.0 % 1.60 16.0% 1.90 19.0%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Expected Return 10.5% Delta Vanlines 1.25 13.0 % 1.60 16.0% Firm Beta Anderson, Inc. 0.90 Nathan's Bakeries Z-man Electronics O Delta Vanlines 1.90 19.0% All of the stocks, Anderson, Inc. O Nathan's Bakeries OZ-man Electronics
Transcribed Image Text:Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Expected Return 10.5% Delta Vanlines 1.25 13.0 % 1.60 16.0% Firm Beta Anderson, Inc. 0.90 Nathan's Bakeries Z-man Electronics O Delta Vanlines 1.90 19.0% All of the stocks, Anderson, Inc. O Nathan's Bakeries OZ-man Electronics
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