Under CAPM, investors will require a higher return for the company that has a higher beta.
Based on a high-level analysis, AT&T might be less sensitive to certain economic factors as, for example, customers are less likely to cut their basic TV and Internet access in an economic downturn.
AT&T’s performance, however, might be subject to non market-related factors such as the notoriously competitive levels of the US telecom market and certain technological changes.,
IBM on the other hand, might be driven by many of the factors affecting the overall market, such as interest rates, employment levels and industrial output.
As such, IBM would likely have a higher beta and investors would require a higher expected return under CAMP.
However, I would note that in practice investors may still demand an additional premium for AT&T’s company and industry-specific risk, which would not be captured by the Capital Asset Pricing Model.
We would note that this response assumes the beta for both companies is calculated against the same basket of securities for the benchmark index such as the S&P.
If an interviewer was to question this underlying assumption, it would be helpful to mention that the answer depends on how and over what period the beta is calculated.