Competition and Capital Markets Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the risk-free rate is 3%. New news arrives that does not change any of these numbers but it does change the expected return of the following stocks:
Expected Return Volatility Beta Green Leaf 12% 20% 1.5 NatSam 10% 40% 1.8 HanBel 9% 30% 0.75 Rebecca Automobile 6% 35% 1.2 a. At current market prices which stocks represent buying opportunities? b. On which stocks should you put a sell order in?