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Investments according to the sml model

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You are looking at two different stocks. Pearsons Corp. has a beta of 1.25 and Rusty Inc. has a beta of 1.95. Which statement is true about these investments according to the SML model?

a. Pearsons Corp. is always a better addition to your portfolio

b. Rusty Inc. is always a better addition to your portfolio

c. The expected return on Pearsons Corp. will be the higher of the two

d. You cannot tell which of the two will have the higher expected return without further information

e. The stock in Pearsons has the same reward to risk ratio as does Rusty Inc.

Reference no: EM133113914

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