Stock a Has a Beta of 1

question 129

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 20%.Stock B has a beta of 0.8 and a standard deviation of 25%.Portfolio P has $200,000 consisting of $100,000 invested in Stock A and $100,000 in Stock B.Which of the following statements is CORRECT? (Assume that the stocks are in equilibrium. )

• A) Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns.
• B) Stock B has a higher required rate of return than Stock A.
• C) Portfolio P has a standard deviation of 22.5%.
• D) More information is needed to determine the portfolio's beta.
• E) Portfolio P has a beta of 1.0.

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Definitions:

Neotropical Region

A biogeographic region that includes South and Central America, the Mexican lowlands, the Caribbean islands, and southernmost parts of Florida, characterized by its distinct fauna and flora.

Greenhouse Gases

Gases in Earth's atmosphere that trap heat, contributing to the greenhouse effect and global warming.

Global Energy Budget

An accounting of the balance between the Earth's energy inputs from the sun and its outputs back into space, influencing climate and weather patterns.

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