Stock a Has a Beta of 1

question 47

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 25%.Stock B has a beta of 1.4 and a standard deviation of 20%.Portfolio AB was created by investing in a combination of Stocks A and B.Portfolio AB has a beta of 1.25 and a standard deviation of 18%.Which of the following statements is CORRECT?

• A) Stock A has more market risk than Portfolio AB.
• B) Stock A has more market risk than Stock B but less stand-alone risk.
• C) Portfolio AB has more money invested in Stock A than in Stock B.
• D) Portfolio AB has the same amount of money invested in each of the two stocks.
• E) Portfolio AB has more money invested in Stock B than in Stock A.

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Definitions:

Innovative Ideas

Novel thoughts, concepts, or approaches that aim to bring about significant improvements or create new value.

Explore

To investigate or examine something thoroughly in order to gain a deeper understanding or discover new information.

Diversity

The integration of people from diverse backgrounds, encompassing multiple nationalities, ethnicities, religious beliefs, economic levels, and sexual orientations.

Bottom-Up Effort

An approach where solutions, ideas, or projects are initiated by the lower levels of a hierarchy and move upwards for approval and implementation, promoting innovation and employee engagement.