### Which one is a better buy

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##### Reference no: EM13295891

Analysts have evaluated the expected returns of IBM and HP stocks based on the revenues and earnings forecast for the upcoming 12 months. IBM has an expected return of 11.2% and risk of beta = 0.9, while HP has an expected return of 12.7% and beta = 1.3. The market risk premium is 7% and the T-Bill rate is 4%.

According to CAPM, how do you valuate these two stocks? Which one is a better buy?

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