Stock a Has a Beta of 1

question 129

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 20%.Stock B has a beta of 0.8 and a standard deviation of 25%.Portfolio P has $200,000 consisting of $100,000 invested in Stock A and $100,000 in Stock B.Which of the following statements is CORRECT? (Assume that the stocks are in equilibrium. )

• A) Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns.
• B) Stock B has a higher required rate of return than Stock A.
• C) Portfolio P has a standard deviation of 22.5%.
• D) More information is needed to determine the portfolio's beta.
• E) Portfolio P has a beta of 1.0.

Analyze the structure and function of the Federal Reserve System, including the role of central banks.

Differentiate among various entities considered as banks under the UCC and understand their regulatory implications.

Appreciate the evolving role of checks within the modern financial system and the impact of electronic transactions.

Acquire knowledge about depositary, collecting, and intermediary banks and their significance in the check processing cycle.

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Definitions:

Ownership Equity

The portion of a company's assets that belongs to shareholders after liabilities have been subtracted.

Market Value

The immediate cost for transactions involving assets or services within a marketplace.

Book Value

The value of an asset according to its balance sheet account balance, calculated by subtracting any related depreciation or amortization from its original cost.

Capital Balance

The amount of money that partners or shareholders have invested in a business, not including profits and losses.