Question: 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 dies change the expected return of the following stocks:
Expected Return Volatility Beta Alpha To Buy
Green Leaf 12% 20% 1.5
NatSam 10% 40% 1.8
HanBel 9% 30% 0.75
Rebecca Automobile 6% 35% 1.2
A. What current market prices, which stocks represent buying opportunities?
B. On which stocks should you put a sell order in?