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:

Adjusting Journal Entry

A record documented at the closing of an accounting cycle to distribute revenues and expenses to the appropriate period they took place in.

General Ledger

A general ledger is a comprehensive record of a company's financial transactions over the life of the organization, serving as the primary source for preparing financial statements.

Supplies Expense

Costs associated with the consumption of supplies necessary for the daily operations of a business, recognized as an expense in the accounting period in which they are used.

Inventory

The entire inventory of products and materials maintained by a business for selling or manufacturing purposes.