You Have the Following Data on (1) the Average Annual

question 18

Multiple Choice

You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?
$\begin{array}{cc}\text { Years }&\text { Market }&\text { Stock A } & \text { Stock B } \\1&0.03&0.16 & 0.05 \\2&0.03&0.20& 0.05 \\3&0.03&0.18 & 0.05 \\4&0.03& 0.25& 0.05 \\5&0.03&0.14 &0.05\end{array}$

• A) b_A > +1; b_B = 0.
• B) b_A = 0; b_B = -1.
• C) b_A< 0; b_B = 0.
• D) b_A < -1; b_B = 1.
• E) b_A > 0; b_B = 1.

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Definitions:

Strabismus

A condition that results in a lack of parallel visual axes of the eyes; commonly called crossed eyes.

Presbyopia

A condition associated with aging in which the eye exhibits a progressively diminished ability to focus on near objects.

Myopia

A condition that occurs when light entering the eye is focused in front of the retina; commonly called nearsightedness.

Glaucoma

A condition in which too much pressure is created in the eye by excessive aqueous humor. This excess pressure can lead to permanent damage of the optic nerves, resulting in blindness.