The Reward-To-Risk Ratio for Stock a Is Less Than the Reward-To-Risk

question 31

Multiple Choice

The reward-to-risk ratio for Stock A is less than the reward-to-risk ratio of Stock B. Stock A has a beta of .82 and Stock B has a beta of 1.29. This information implies that:

• A) Stock A is riskier than Stock B and both stocks are fairly priced.
• B) Stock A is less risky than Stock B and both stocks are fairly priced.
• C) either Stock A is underpriced or Stock B is overpriced or both.
• D) either Stock A is overpriced or Stock B is underpriced or both.
• E) both Stock A and Stock B are correctly priced since Stock A is less risky than Stock B.

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Definitions:

Electrically charged atoms

Atoms that have gained or lost electrons, resulting in a positive or negative electrical charge, known as ions.

Free radicals

Unstable atoms or molecules with an unpaired electron that can cause cellular damage, contributing to aging and diseases.

Cellular wastes

Unwanted or toxic byproducts produced by cells during metabolism and other biological processes, which need to be removed or recycled to maintain cellular health.

Multiple sclerosis

A chronic autoimmune disease that affects the central nervous system, leading to muscle weakness, coordination problems, and other symptoms.