Stock A's Beta Is 1

question 8

Multiple Choice

Stock A's beta is 1.5 and Stock B's beta is 0.5.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 Stock A.
• B) Stock A must be a more desirable addition to a portfolio than Stock B.
• C) The expected return on Stock A should be greater than that on Stock B.
• D) The expected return on Stock B should be greater than that on Stock A.
• E) When held in isolation, Stock A has greater risk than Stock B.

---

Definitions:

Misrepresentation

A false statement or lie that induces someone to enter into a contract.

Xerox Copier

A brand of photocopier machines known for their document copying capabilities, often used generically to refer to photocopying.

Maintenance-Free

Products or systems designed to operate without needing regular maintenance or care from the user.

Misrepresentation

The act of providing false or misleading information with the intent to deceive in a contractual agreement.