The risk free rate is 2%.The expected rate of return on the market is 12%.Beta and the expected rate of return for four stocks are as follows.: ABC .8 , 10%; DEF 1, 12%; GHI 1.2 , 13%, and JKL 2, 22%.Which of these stocks should not be purchased?
A)ABC
B)DEF
C)GHI
D)JKL

Question

Quizplus · Accepted Answer

GHI's expected return of 13% is less than the required return of 14% (calculated using the CAPM: 2% + 1.2*(12%-2%)).

The Risk Free Rate Is 2