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.

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Definitions:

Conscientiousness

is a personality trait characterized by diligence, carefulness, organization, self-discipline, and the ability to regulate oneself.

Conscientiousness

A characteristic that denotes being hardworking, meticulous, and having the motivation to perform a job effectively.

Extroversion

A personality trait characterized by being outgoing, talkative, and energetic in social situations.

Neuroticism

A personality trait characterized by emotional instability, anxiety, moodiness, and a high degree of stress response.