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Which of the following companies should have a higher expected return? Suppose Amazon has a standard...

Which of the following companies should have a higher expected return? Suppose Amazon has a standard deviation of 11 and a beta of 1.9, while Astrodome Inc. has a standard deviation of 14 while its beta is 1.3.

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Answer #1

Answer: Amazon should have higher expected return.

Expected return=Risk free rate +Beta*(Market return-Risk free rate)
Considering the risk free rate and market return to be same for both the companies.
The company with higher beta will have higher expected return.

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