Use the Information for the Question(s)below

question 5

Multiple Choice

Use the information for the question(s) below.
Suppose that in the coming year,you expect Exxon-Mobil stock to have a volatility of 42% and a beta of 0.9,and Merck's stock to have a volatility of 24% and a beta of 1.1.The risk-free interest rate is 4% and the market's expected return is 12%.
-Which stock has the highest systematic risk?

• A)Merck since it has a higher beta
• B)Exxon-Mobil since it has a lower beta
• C)Exxon-Mobil since it has a higher volatility
• D)Merck since it has a lower volatility

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Definitions:

Tokonoma

A shallow alcove in a Japanese room, which is used for decoration, such as a painting or stylized flower arrangement.

Alcove

A recessed section of a room or garden, often used for seating or display of items.

Nezumi

Japanese, “mouse-gray” (ceramics).

Engawa

A traditional Japanese architectural feature that serves as an intermediary space or veranda between the indoors and the outdoors.