Stock A's Beta Is 1

question 96

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,assuming the CAPM is correct?

• A)Stock A would be a more desirable addition to a portfolio than Stock B.
• B)In equilibrium, the expected return on Stock B will be greater than that on Stock A.
• C)Stock B would be a more desirable addition to a portfolio than Stock A.
• D)In equilibrium, the expected return on Stock A will be greater than that on Stock B.

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Definitions:

Blood Type

A categorization of blood determined by whether specific inherited antigens are present or absent on red blood cell surfaces.

Dependent

A variable in an experiment or model that is affected by other variables, known as independent variables.

Frequency of Car Accidents

The number of occurrences of car accidents within a specified period, often used to assess risk and improve safety measures.

Association

A statistical relationship between two or more variables.