Reference no: EM132516083

Capital Asset Pricing Model - Securities Market Line

Given are the following two stocks A and B:

Security Expected Rate Of Return Beta

A 0.12 1.2

B 0.14 1.8

If the expected market rate of return is 0.09 and the risk-free rate is 0.05, which security would be considered the better buy and why?

Choose your answer and show your calculations.

A) Security A, because it offers an expected excess return of 1.2%.

B) Security B, because it offers an expected excess return of 1.8%

C) Security A, because it offers an expected excess return of 2.2%

D) Security B, because it offers an expected return of 14%

E) Security B, because it has a higher beta