Stock a Has a Beta of 1

question 47

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 25%.Stock B has a beta of 1.4 and a standard deviation of 20%.Portfolio AB was created by investing in a combination of Stocks A and B.Portfolio AB has a beta of 1.25 and a standard deviation of 18%.Which of the following statements is CORRECT?

• A) Stock A has more market risk than Portfolio AB.
• B) Stock A has more market risk than Stock B but less stand-alone risk.
• C) Portfolio AB has more money invested in Stock A than in Stock B.
• D) Portfolio AB has the same amount of money invested in each of the two stocks.
• E) Portfolio AB has more money invested in Stock B than in Stock A.

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Definitions:

Corbel-Vaulted Galleries

Architectural features where arches or vaults are supported by a series of corbels—projecting stones, bricks, or wooden blocks—creating a passageway or gallery.

Tiryns

An ancient city in Greece, known for its archaeological site that includes impressive Mycenaean period fortifications.

Inlaid Dagger

A dagger with its handle or sheath decorated by setting pieces of material such as metal, stone, or wood into its surface to create patterns or pictures.

Mesopotamian

Relating to Mesopotamia, an ancient region located between the Tigris and Euphrates rivers, known as the cradle of civilization.