Stock X Has a Beta of 0

question 60

Multiple Choice

Stock X has a beta of 0.6,while Stock Y has a beta of 1.4.Which of the following statements is correct?

• A)A portfolio consisting of $50,000 invested in Stock X and $50,000 invested in Stock Y will have a required return that exceeds that of the overall market.
• B)Stock Y must have a higher expected return and a higher standard deviation than Stock X.
• C)If expected inflation increases (but the market risk premium is unchanged), the required return on both stocks will decrease by the same amount.
• D)If the market risk premium decreases but expected inflation is unchanged, the required return on both stocks will decrease, but the decrease will be greater for Stock Y.

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Definitions:

Discolored Skin

A change in skin color, which may be a sign of injury, illness, or other medical conditions.

Sodium

A chemical element, symbol Na, that is a highly reactive metal and an essential component of animal and human physiology, particularly in the regulation of fluids and blood pressure.

Potassium

A chemical element with symbol K, essential for various bodily functions including heart rate and muscle function.

Calcium

A mineral essential for healthy bones, teeth, muscle function, and nerve signaling.