Question

Investments Beta Analyst's Estimated Return Stock X 2.3 15.5% Stock Y 1.2 13.6% Market Portfolio 11.5%...

Investments Beta Analyst's Estimated Return

Stock X

 2.3

15.5%
Stock Y 1.2 13.6%
Market Portfolio

11.5%
Risk-Free Rate 4.0%

Refer to Exhibit 9.18. Based on the analyst's estimated return and the stocks' betas the analyst should

a. sell both Stock X and Stock Y.

b. sell Stock X and Buy Stock Y.

c. buy Stock X and Sell Stock Y.

d. buy both Stock X and Stock Y.

e. None of these are correct.

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Answer #1

Ans is b. sell Stock X and Buy Stock Y

Please upvote if the ans is helpful.In case of doubt,do comment.Thanks.

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