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.

---

Definitions:

Politeness

The practice of showing respect and consideration for others through courteous behavior and language.

Self-esteem

A measure of how much value and respect one has for oneself.

Strengths and Weaknesses

An assessment or analysis of the positive attributes and limitations of an entity, such as an organization, individual, or system.

Critical

Inclined to find fault or judge with severity, often too readily, involving analysis and evaluation.