You are interested in two stocks: Light Ltd and Heavy Ltd. Your expected rate of...
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You are interested in two stocks: Light Ltd and Heavy Ltd. Your expected rate of return on Light Ltd is 9.5%, and its beta is 1.2. Your expected rate of return for Heavy Ltd is 15%, and its beta is 1.65. If the risk-free rate of return is 4.2%, and the expected return on the market is 9%, which stock would be the preferred buy and why? Select one: a. Heavy Ltd because it offers an expected return of 15%. b. Light Ltd because it offers an abnormal return of 0.46%. Heavy Ltd because it offers an abnormal return of 6%. Od. Heavy Ltd because it offers an abnormal return of 2.88%
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