Consider the Following Average Annual Returns for Stocks a and B

question 88

Multiple Choice

Consider the following average annual returns for Stocks A and B and the Market.Which of the possible answers best describes the historical betas for A and B? $\begin{array}{rrrr}\text { Years } & \text { Market } & \text { Stock A }&\text { Stock B }\\1 & 0.03 & 0.16 & 0.05 \\2 & -0.05 & 0.20 & 0.05 \\3 & 0.01 & 0.18 & 0.05 \\4 & -0.10 & 0.25 & 0.05 \\5 & 0.06 & 0.14 & 0.05\end{array}$

• A) b_A > +1; b_B = 0.
• B) b_A = 0; b_B = ?1.
• C) b_A < 0; b_B = 0.
• D) b_A < ?1; b_B = 1.
• E) b_A > 0; b_B = 1.

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