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? Firm Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% 1.60 16.0% Nathan's Bakeries Z-man Electronics Beta Expected Return O Anderson, Inc. O, Z-man Electronics 1.90 19.0% O Nathan's Bakeries O Delta Vanlines O All of the stocks
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? Firm Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% 1.60 16.0% Nathan's Bakeries Z-man Electronics Beta Expected Return O Anderson, Inc. O, Z-man Electronics 1.90 19.0% O Nathan's Bakeries O Delta Vanlines O All of the stocks
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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Vijay
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?
Firm
Anderson, Inc. 0.90
Delta Vanlines 1.25
1.60
Nathan's
Bakeries
Z-man
Electronics
Beta Expected Return
10.5%
13.0%
16.0%
O Anderson, Inc.
O. Z-man Electronics
1.90 19.0%
O Nathan's Bakeries
Delta Vanlines
O All of the stocks
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