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The expected return of the S&P 500 Index is 10% and a Treasury Bill currently has...

The expected return of the S&P 500 Index is 10% and a Treasury Bill currently has an expected return of 2.5%. According to stock analysts, Ingrid Corp stock has an expected return of 15%. You should buy this stock if you believe the following:

Ingrid Corp’s beta is 1.6.

You should buy the stock, regardless of the stock’s beta.

Ingrid Corp’s beta is 2.1.

Not enough information given to make an informed decision.

You should never buy the stock.
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Answer #1

Beta is calculated as follows:-

=(expected return-risk free rate)/risk premium

=(15%-2.5%)/(10%-2.5%)

=1.67

The answer is a)

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