Stock a Has a Beta of 1

question 95

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 25%.Stock B has a beta of 1.4 and a standard deviation of 20%.Portfolio AB was created by investing in a combination of Stocks A and B.Portfolio AB has a beta of 1.25 and a standard deviation of 18%.Which of the following statements is correct?

• A)Stock A has more market risk than Portfolio AB.
• B)Stock A has more market risk than Stock B but less stand-alone risk.
• C)Portfolio AB has more money invested in Stock A than in stock B.
• D)Portfolio AB has the same amount of money invested in each of the two stocks.

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