Stock A's Beta Is 1

question 24

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.

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