If a Certain Stock Has a Beta Greater Than 1

question 54

Multiple Choice

If a certain stock has a beta greater than 1.0,it means that

• A)the stock's return is more volatile than that of the market portfolio.
• B)an investor can eliminate the risk by combining it with another stock that has a negative beta.
• C)an investor will earn a higher return on his stock than that on the market portfolio.
• D)the stock is less risky than the market portfolio.

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Definitions:

Coupon Rate

The annual interest rate paid by a bond relative to its face value, representing the yield an investor is expected to earn if the bond is held to maturity.

Yield to Maturity

The total return anticipated on a bond if it is held until its maturity date, considering all interest payments and principal repayment.

Coupon Rate

The interest rate on a bond that the issuer promises to pay annually or semi-annually to the bondholder.

Market Yield

The annual income on an investment divided by the market price of the investment, typically expressed as a percentage.