Computation of required rate of return using capm approach

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Computation of required rate of return using CAPM approach

You have been scouring The Wall Street Journal looking for stocks that are \"good values\" and have calculated the expected returns for five stocks (a,b,c,d,e). Assume the risk-free rate (kRF) is 7 percent and the market risk premium (kM - kRF) is 2 percent. Which security would be the best investment? (Assume you must choose just one.)

Expected Return	Beta
a.	9.01%	1.70
b.	7.06%	0.00
c.	5.04%	-0.67
d.	8.74%	0.87
e.	11.50%	1.4

Reference no: EM1316473

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