Stock A's Beta Is 1

question 14

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, assuming the CAPM is correct.

• A) Stock A would be a more desirable addition to a portfolio than Stock B.
• B) In equilibrium, the expected return on Stock B will be greater than that on Stock A.
• C) Stock B would be a more desirable addition to a portfolio than Stock A.
• D) In equilibrium, the expected return on Stock A will be greater than that on Stock B.

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Definitions:

Clergy

A group of people ordained for religious duties, especially in Christian traditions.

Moral Therapy

A 19th-century approach to treating mental illness that emphasized humane treatment, moral discipline, and the therapeutic benefits of a structured environment.

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A geographical region of England, characterized by its distinct cultural and historical identity, encompassing cities like Manchester, Liverpool, and Newcastle.

William Tuke

A pioneering figure in the reform of mental health care in the 18th century, known for promoting humane treatment.