Stock a Has a Beta = 0

question 1

Multiple Choice

Stock A has a beta = 0.8, while Stock B has a beta = 1.6. Which of the following statements is most correct?

• A) Stock B's required return is double that of Stock A's.
• B) An equally weighted portfolio of Stock A and Stock B will have a beta less than 1.2.
• C) If market participants become more risk averse, the required return on Stock B will increase more than the required return for Stock A.
• D) All of the answers above are correct.
• E) Answers a and c are correct.

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Definitions:

Illusionistic Perspective

An artistic technique used to create the illusion of depth and three-dimensionality on a flat surface, often seen in Renaissance paintings.

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A notion in philosophy that suggests the presence of irrational aspects in concrete reality, challenging the predominance of rational thought in understanding existence.

René Magritte

A Belgian surrealist artist known for his thought-provoking images that challenge observers' preconditioned perceptions of reality.

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was a Spanish surrealist artist known for his eccentric and dream-like paintings, sculptures, and other creative works.