HMA Universal and the market have had the following returns over

Question: HMA, Universal, and the market have had the following returns over….

Please include formulas!

HMA, Universal, and the market have had the following returns over the past four years:

Year	Market	HMA	Universal
1	11%	10%	12%
2	7%	4%	-3%
3	17%	12%	21%
4	-3%	-2%	-5%

The risk-free rate is 7 percent. The market risk premium is 5 percent. The expected rate of return on both stocks is 12 percent. Which stock would you purchase?