The Beta of Stock a Is 2

Multiple Choice

The beta of Stock A is 2.1. The risk-free rate is 6 percent, and the market return is 13 percent. The expected rate of return of Stock A is 15.5 percent. Based on the above information, which of the following statements is true?

A) An investor should buy Stock A because its expected rate of return is less than the required rate of return.
B) An investor should buy Stock A because its expected rate of return is greater than the required rate of return.
C) An investor should not buy Stock A because its expected rate of return is greater than the required rate of return.
D) An investor should not buy Stock A because its expected rate of return is less than the required rate of return.
E) An investor should be indifferent towards buying or selling the stock.