Which of these stocksare suitable for investment

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Reference no: EM13305760

Your neighbor is a security analyst. He has conducted his researchabout some stocks in Karachi Stock Exchange (KSE) and his findingsare as follows:

Stock A will have a return of 18%, stock B will have a return of 20% and stock C will have a return of 22%, but his findings do notinvolve the CAPM (Capital Asset Pricing Model).

You are a business graduate and when you have used CAPM, you havecome to know that:

Stock A's expected return is 15.50%, Stock B's expectedreturn is 24.63% and Stock C's expected return is25.39%.

In your opinion, whether the KSE has over-priced or under-pricedeach stock and in the light of these results, which of these stocksare suitable for investment?

 

Reference no: EM13305760

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