Stock A's Beta Is 1

question 38

Multiple Choice

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

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

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Definitions:

Sampling Technique

A method used in statistical analysis to select a subset of individuals or items from a larger population to estimate characteristics of the whole population.

Population

The total number of people or organisms inhabiting a particular area or space, often studied in demographics and ecology.

Supplier Certification

A process ensuring suppliers meet predefined quality standards and requirements for products or services.

Lower Costs

The reduction of expenditure or expenses in the production, acquisition, or maintenance of goods and services without compromising quality.