Stock A's Beta Is 1

question 8

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

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Definitions:

No Fault

A legal term indicating that a claim or case is processed without the necessity to prove negligence or fault by any party involved.

Common Law

The body of law developed from judicial decisions of courts and similar tribunals, serving as precedent for future cases.

Contributory Negligence

A legal defense where the plaintiff's own negligence played a role in causing their damages or injury, potentially reducing the liability of the defendant.

Exercise Reasonable Care

The requirement to act with the degree of caution and concern for the safety of oneself and others that a reasonably prudent person would under the same circumstances.