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You are trying to decide whether to purchase stock or not. The stock is currently sold...

  1. You are trying to decide whether to purchase stock or not. The stock is currently sold for $43.54 and is expected to be $46.50 in a year. A dividend of $1.50 per share will be distributed during the year. The stock has a beta of 1.25. The risk-free rate is 3%, and the expected return on the market is 10%. Based on the information, should you buy the stock?
    • Yes, because the expected return of the stock is above the SML.
    • No, because the expected return of the stock is below the SML.
    • Yes, because the expected return of the stock is below the SML.
    • No, because the expected return of the stock is above the SML.
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