You Expect General Motors (GM) to Have a Beta of 1

question 86

Multiple Choice

You expect General Motors (GM) to have a beta of 1 over the next year and the beta of Exxon Mobil (XOM) to be 1.2 over the next year. Also, you expect the volatility of General Motors to be 30% and that of Exxon Mobil to be 40% over the next year. Which stock has more systematic risk? Which stock has more total risk?

• A) GM, GM
• B) GM, XOM
• C) XOM, XOM
• D) XOM, GM

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Definitions:

Home Runs

In baseball, a hit by a batter that allows them to circle all the bases, reaching home safely in one play, usually by hitting the ball over the outfield fence.

American League

One of two leagues making up Major League Baseball (MLB) in the United States and Canada, featuring teams such as the New York Yankees and Boston Red Sox.

Histogram

A graphical representation of data using bars of different heights, where each bar groups numbers into ranges to show the distribution of a dataset.

Mean

The average of a set of numbers, calculated by adding all the numbers together and dividing by the number of numbers.