Question: Consider information about Coca Cola Company (KO) stock on March 15, 2021:

1. Suppose the market risk premium is 6.71% and the risk-free interest rate is 1.64% (from Ibbotson/Datastream data using S&P 500 and 10-year Treasury Note yields), calculate the expected return of investing in KO stock using the CAPM? (5 points)
2. If you believe that the analysts’ consensus one-year-ahead forecast for KO (denoted "Target Price" in Capital IQ exhibit below) is reasonable, would you expect to earn a return that differs from your CAPM-based calculations in (a) above? If yes, by how much? Would you buy or sell shares of KO stock to do so? Offer at least one or two reasons why you might hesitate to take this recommended action. (5 points)

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