Stock a Has a Beta of 1

question 85

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 20 percent. Stock B has a beta of 0.8 and a standard deviation of 25 percent. Portfolio P is a $200,000 portfolio consisting of $100,000 invested in Stock A and $100,000 invested in Stock B. Which of the following statements is most correct? (Assume that the required return is determined by the Security Market Line.)

• A) Stock B has a higher required rate of return than stock A.
• B) Portfolio P has a standard deviation of 22.5 percent.
• C) Portfolio P has a beta equal to 1.0.
• D) Statements a and b are correct.
• E) Statements a and c are correct.

---

Definitions:

Psychogenic Amnesia

Memory loss caused by psychological stress or trauma, not by neurological factors.

Organic Amnesia

A form of amnesia caused by brain injury or damage affecting memory, not linked to psychological factors.

Dissociative Fugue

A rare psychiatric disorder characterized by reversible amnesia for personal identity, including the memories, personality, and other identifying characteristics of individuality.

Psychoanalytic Theory

A set of theories originating from Sigmund Freud, which suggest that human behavior is profoundly influenced by unconscious motives.