Propose we only have the information of beta and expected return, if we know the value of the risk-free-rate, can we determine which one of the following stocks is priced higher.
Stock A : Beta 1.08, Expected Return 12.8%
Stock B : Beta 0.66, Expected Return 9.6%
CAPM (Capital Asset Pricing Model) gives
r(required return) = rf (RFR) + beta x MRP (Market Risk Premium)
So, there are 3 variables (RFR, beta and ...
We use CAPM (Capital Asset Pricing Model) to determine which one of the stocks is priced higher.