Stock A's Beta Is 1

question 96

Multiple Choice

Stock A's beta is 1.7 and Stock B's beta is 0.7.Which of the following statements must be true about these securities? (Assume market equilibrium.)

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

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Definitions:

Culture

The social behavior, norms, knowledge, and artifacts of a group of people, passed from one generation to another through communication and imitation.

Influence Learning

Refers to the process by which individuals alter their behavior, attitudes, or knowledge based on observed behaviors of others or by being in their presence, often linked to social or observational learning.

Variable-Ratio Schedule

A type of reinforcement schedule in which a response is reinforced after an unpredictable number of responses, promoting high and steady response rates.

Fixed-Ratio Schedule

A reinforcement strategy in behaviorism where a response is reinforced only after a specified number of responses.