Which of the Following Is/are True Regarding a Stock with a Beta

question 9

Multiple Choice

Which of the following is/are true regarding a stock with a beta of 1.2?
I. The stock has 20 percent more systematic risk than the market.
II. If the market increases by one percent, the stock will increase by 1.2 percent.
III. The stock has a greater expected return than the market.
IV. The stock has a greater reward-to-risk ratio than the market.

• A) I only
• B) I, II, and III only
• C) II and II only
• D) I and III only
• E) I, II, III, and IV

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Definitions:

Growth Rate

The percentage increase in the size or value of something, such as an economy, company’s revenue, or population, over a specific period.

Discount Rate

The interest rate used to discount future cash flows to their present value.

Stock Value

The current price at which a share of a company's stock can be bought or sold. It is determined by the market and can fluctuate based on demand and supply.

Present Value

The today's worth of future monetary sum or continuous cash flows, considering a defined interest rate.