Stock a Has a Beta of 1

question 37

Multiple Choice

Stock A has a beta of 1.5 and Stock B has a beta of 0.5. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.)

• A) When held in isolation, Stock A has greater risk than Stock B.
• B) Stock B would be a more desirable addition to a portfolio than Stock A.
• C) Stock A would be a more desirable addition to a portfolio than Stock B.
• D) The expected return on Stock A will be greater than that on Stock B.
• E) The expected return on Stock B will be greater than that on Stock A.

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Definitions:

Vendor Managed Inventory

A business model where the supplier assumes the responsibility of managing inventory levels at the retailer or buyer’s location, aiming to improve supply chain efficiency.

Coordinated Stocking

A strategy where inventory levels across different locations or stages in a supply chain are managed in sync to optimize overall performance and minimize costs.

Sell-in to Sell-through

The process from selling products into retail channels (sell-in) to the actual sale of those products to the end consumers (sell-through).

CRP System

Continuous Replenishment Program, a supply chain management strategy aimed at improving inventory management and enhancing the flow of goods from suppliers to consumers.