Stock A's Beta Is 1

question 8

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 about these securities? (Assume market equilibrium.)

• A) Stock B must be a more desirable addition to a portfolio than Stock A.
• B) Stock A must be a more desirable addition to a portfolio than Stock B.
• C) The expected return on Stock A should be greater than that on Stock B.
• D) The expected return on Stock B should be greater than that on Stock A.
• E) When held in isolation, Stock A has greater risk than Stock B.

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Definitions:

Statistic

A numerical value derived from a sample that represents a feature of the population from which it was drawn.

Research Hypotheses

Research hypotheses are statements made by researchers that propose a relationship or difference between variables, to be tested through experimental or observational study.

Statistical Hypotheses

Statements made about the relationships between variables, specifically in terms of whether a statistical relationship exists in the population that can be tested.

Data Analysis

The process of inspecting, cleansing, transforming, and modeling data with the goal of discovering useful information, informing conclusions, and supporting decision-making.