Question: Referring to Problem, if you expect a significant market slump, would your decision be altered? Explain.
Problem: You are evaluating two possible stock investments, Leverage Co. and Value Corp. Leverage Co. has an expected return of 10% and a beta of 1.4. Value Corp. has an expected return of 10% and a beta of 0.9. Based only on this data, which stock should you buy and why?