Stock a Has a Beta of 1

question 37

Multiple Choice

Stock A has a beta of 1.5 and Stock B has a beta of 0.5. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.)

• A) When held in isolation, Stock A has greater risk than Stock B.
• B) Stock B would be a more desirable addition to a portfolio than Stock A.
• C) Stock A would be a more desirable addition to a portfolio than Stock B.
• D) The expected return on Stock A will be greater than that on Stock B.
• E) The expected return on Stock B will be greater than that on Stock A.

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Definitions:

Independent

The state or quality of being self-reliant and not influenced or controlled by others in terms of one's opinions or conduct.

Task-oriented Activities

Actions or projects focused on achieving a specific goal or completing a particular task.

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Family units consisting of one parent living with their child or children, without the presence of a partner.

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Relationships between parents and children that are characterized by lack of emotional support, understanding, and healthy communication, leading to negative outcomes in child development.