The risk-free rate of return-return on the market portfolio

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Reference no: EM13826231

The stock of Milton, Inc., is expected to return 17% annually with a standard deviation of 8%. The stock of Eaton, Inc., is expected to return 28% annually with a standard deviation of 12%. The beta of the Milton stock is 1.50, and the beta of the Eaton stock is 2.2. The risk-free rate of return is expected to be 3%, but the return on the market portfolio is 14%.

Which one is a better buy in the current market?

A. Milton is a better buy since the required rate of return is greater than the expected return.

B. Eaton is a better buy since the required rate of return is less than the expected return.

C. Eaton is a better buy since the required rate of return is greater than the expected return.

D. Milton is a better buy since the required rate of return is less than the expected return.

Reference no: EM13826231

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