Stock A's Beta Is 1

question 96

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 about these securities? (Assume market equilibrium.)

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