According to the capital asset pricing model, which of the following stocks should have the highest required rate of return? $\begin{array}{c}
\begin{array}{lll}
\underline{\text {Stock Name}}\
\text {Alpha Autom obiles}\
\text {Beta Electronics}\
\text {Omega Foods}
\end{array}
\begin{array}{c}
\underline{\text { Standard Deviation }} \
19.0 \% \
28.0 \
8.0
\end{array}
\begin{array}{c}
\underline{\text { Beta}} \
1.8\% \
1.1 \
0.7
\end{array}
\end{array}$

A)Beta Electronics because its standard deviation is highest.
B)Alpha Automobiles because its beta coefficient is highest.
C)Omega foods because the ration of standard deviation/beta is the lowest.
D)Not enough information is given to answer this question.

Question

According to the capital asset pricing model, which of the following stocks should have the highest required rate of return? $\begin{array}{c}
\begin{array}{lll}
\underline{\text {Stock Name}}\
\text {Alpha Autom obiles}\
\text {Beta Electronics}\
\text {Omega Foods}
\end{array}
\begin{array}{c}
\underline{\text { Standard Deviation }} \
19.0 \% \
28.0 \
8.0 
\end{array}
\begin{array}{c}
\underline{\text { Beta}} \
1.8\% \
1.1 \
0.7
\end{array}
\end{array}$

A)Beta Electronics because its standard deviation is highest.
B)Alpha Automobiles because its beta coefficient is highest.
C)Omega foods because the ration of standard deviation/beta is the lowest.
D)Not enough information is given to answer this question.

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) states that the required rate of return is determined by the beta coefficient, which measures the stock's sensitivity to market movements. Alpha Automobiles has the highest beta, indicating it should have the highest required rate of return.

According to the Capital Asset Pricing Model, Which of the Following