Question: You are considering the purchase of Superior Oil International, Ltd. (stock symbol SOIL) common stock. You consult Yahoo Finance and find that the stock has a ß (beta) of 2.0. Further research indicates that the current risk free rate of return is 4.0% and the expected return on the entire stock market is 14%. Use the Capital Asset Pricing Model to find the following:
What is the expected rate of return on SOIL's stock?
What is the Market Risk Premium?
Is this investment more or less risky than the overall market?