Based on the CAPM, which stock should have the highest expected return over the next year?
A) McDonald's
B) Barrick Gold
C) Campbell Soup
D) Bank of America

Question

Quizplus · Accepted Answer

The Capital Asset Pricing Model (CAPM) suggests that the expected return on a stock is related to its beta, which measures its sensitivity to market movements. Bank of America, being a financial institution, likely has a higher beta compared to the other companies listed, which are in more stable industries. Therefore, it should have the highest expected return according to CAPM.

Based on the CAPM, Which Stock Should Have the Highest