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:

Numerator

The top number in a fraction used to calculate a rate or ratio, representing the part of a whole.

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A contagious viral infection commonly affecting children, characterized by sores in the mouth and a rash on the hands and feet.

Active Surveillance

A monitoring strategy for certain diseases that involves regular checks and tests to closely observe any changes in a patient's condition without treating until necessary.