Stock A's Beta Is 1

question 96

Multiple Choice

Stock A's beta is 1.7 and Stock B's beta is 0.7.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 A.
• B) Stock A must be a more desirable addition to a portfolio than B.
• C) The expected return on Stock A should be greater than that on B.
• D) The expected return on Stock B should be greater than that on A.
• E) When held in isolation, Stock A has more risk than Stock B.

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Definitions:

Kohlberg

Refers to Lawrence Kohlberg, a psychologist best known for his theory of stages of moral development.

Moral Judgments

Evaluations or decisions made about the rightness or wrongness of actions based on a set of ethical principles or a moral framework.

Kohlberg

A psychologist best known for his theory of stages of moral development.

Self-Defeating Decision

Choices or actions that thwart the individual's own goals or interests, often due to underlying psychological issues.