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.

---

Definitions:

NSF Check

A check that cannot be processed due to insufficient funds in the account of the drawer, commonly known as a bounced check.

Bank Service Charge

Fees charged by a bank for the maintenance of account services and other banking transactions.

Bank Reconciliation

The process of matching and comparing figures from the accounting records against those shown on a bank statement to ensure consistency.

Subsidiary Ledger

A detailed ledger that contains all the transaction details of a specific account, which then summarizes into a general ledger.