Stock A's Beta Is 1

question 53

Multiple Choice

Stock A's beta is 1.7 and Stock B's beta is 0.7.Which of the following statements must be true, assuming the CAPM is correct.

• A) In equilibrium, the expected return on Stock B will be greater than that on Stock A.
• B) When held in isolation, Stock A has more risk than Stock B.
• C) Stock B would be a more desirable addition to a portfolio than A.
• D) In equilibrium, the expected return on Stock A will be greater than that on B.
• E) Stock A would be a more desirable addition to a portfolio then Stock B.

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Definitions:

Cognitive Restructuring

A psychological technique that aims to challenge and change irrational and negative thoughts, beliefs, and attitudes.

Enactment

The process of acting out or expressing thoughts, feelings, or behaviors, often in a therapeutic context to gain insight.

Culturally Competent

The ability to understand, communicate with, and effectively interact with people across cultures.

Culturally Mediated Behavior

Behaviors and practices that are influenced or shaped by cultural beliefs, values, and norms.