You Observe the Following Information Regarding Companies X and Y

question 102

Multiple Choice

You observe the following information regarding Companies X and Y: ∙
Company X has a higher expected return than Company Y.
∙
Company X has a lower standard deviation of returns than Company Y.
∙
Company X has a higher beta than Company Y.
Given this information, which of the following statements is CORRECT?

• A) Company X has a lower coefficient of variation than Company Y.
• B) Company X has less market risk than Company Y.
• C) Company X's returns will be negative when Y's returns are positive.
• D) Company X's stock is a better buy than Company Y's stock.
• E) Company X has more diversifiable risk than Company Y.

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Definitions:

Business Combinations

Transactions or events in which one entity gains control over one or more other businesses, often resulting in consolidations or acquisitions.

Parent-Company Method

An accounting approach where the parent company reports its investment in subsidiaries at cost, often used in separate financial statements.

Ownership Risk

The uncertainties faced by an entity's owners due to changes in the business environment, regulatory landscapes, or operational performance affecting the value of their investment.

Share Dilution

the decrease in existing shareholders' ownership percentage of a company as a result of the company issuing new shares.