If a Certain Stock Has a Beta Greater Than 1

question 54

Multiple Choice

If a certain stock has a beta greater than 1.0,it means that

• A)the stock's return is more volatile than that of the market portfolio.
• B)an investor can eliminate the risk by combining it with another stock that has a negative beta.
• C)an investor will earn a higher return on his stock than that on the market portfolio.
• D)the stock is less risky than the market portfolio.

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Definitions:

Tax

A compulsory financial charge imposed by a government on individuals or entities to fund various public expenditures.

Marginal Social Benefit

An additional gain to society derived from consuming or producing another unit of a good or service.

Marginal Social Cost

An increased charge to the general public for the creation of one more unit of a product or service.

Pollution

The presence in or introduction into the environment of a substance or thing that has harmful or poisonous effects.