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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