If an individual stock's beta is higher than 1.0, that stock is: Group of answer choices exactly as risky as the market. always the most attractive to investors. less risky than the market. riskier than the market.

If an individual stock's beta is higher than 1.0, that stock is: Group of answer choices exactly as risky as the market. always the most attractive to investors. less risky than the market. riskier than the market.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 10QTD

See similar textbooks

Similar questions

1. A stock with a beta of zero would be expected to have a rate of return equal to a. the risk-free rate b. the market risk premium c. zero d. the market rate of return 2. If an individual stock's beta is higher than 1.0, that stock is: a. riskier than the market. b. always the most attractive to investors. c. less risky than the market. d. exactly as risky as the market. 3. If Brewer Corporation's bonds are currently yielding 8% in the marketplace, why is the firm's cost of debt lower? a. Market interest rates have increased. b. Additional debt can be issued more cheaply than the original debt. c. Interest is deductible for tax purposes. d. There should be no difference; cost of debt is the same as the bonds' market yield.
An individual stock with a beta greater than 1.0 is a. Same as risky as the market b. Riskier that the market c. Less risky as the market d. It has no relationship with the market
25 - Which of the following statements is CORRECT? If you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio. The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. One could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. However, this historical beta may differ from the beta that exists in the future. The beta of a portfolio of stocks is always larger than the betas of any of the individual stocks. It is theoretically possible for a stock to have a beta of 1.0. If a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free) rate of return. The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.
A stock with a beta of 0.8 is _______ risky than the market and will _______ when the market changes. Reminder: Beta = change in stock / change in market.....what would cause this fraction to be less than 1....a smaller or larger change in the stock when the market changes....is that an underreaction or overreaction? Less; overreact Less; underreact More; overreact More; underreact
10
17 [Question text] Stock W, X, Y and Z has a beta of 1.19, 0.87, 0.91 and 1.26, respectively. Based on the beta values, which stock should you choose if you are a risk averse investor? Select one: A. Z B. X C. Y D. W
What is a stock's alpha? Group of answer choices The amount you expect to earn on a security relative to some appropriate "benchmark" that appropriately reflects the risk of that investment In a CAPM world, if a stock is on the security market line, it's alpha is zero If you earn a return on security greater than the market overall, then you generated positive alpha In a CAPM world, you invest in a stock that has a Beta of 1. If you earn a return greater than the market, then you generated positive alpha In a CAPM world, you invest in a stock that has a Beta of 2. If you earn a return greater than the market, then you generated positive alpha
15 A stock with a beta of zero would be expected to have a rate of return equal to Group of answer choices the risk-free rate the market rate of return the market risk premium zero
16. Stock X's beta is 1.8 and Stock Y's beta is 1.0. Which of the following statement must be true about these securities? Group of answer choices The expected return on Stock X should be greater than that on Stock Y. The expected return on Stock Y should be greater than that on Stock X. Stock X must be a more desirable addition to a portfolio than Stock Y. Stock Y must be a more desirable addition to a portfolio than Stock X.
Question: You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.27 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.23 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock beta 1.20
Problem 1 You are given the following information about stock X and the market portfolio, M: Riskless Asset (f) Stock X Market Portfolio (M) E(r) 0.04 (4%) ? 0.10 σ 0.00 0.30 0.20 You are not given the expected return of stock X. The correlation of the returns on the stock X and the market portfolio is equal to 0.4. a) What is the beta (6) of stock X? b) Assuming the CAPM holds, what is the expected return on stock X? c) You have $1,000 to invest in some combination of the risk-free asset, stock X, and the market portfolio. You are thinking of investing $300 in the risk free asset, $400 in stock X, and $300 in the market portfolio. What is the overall expected return, standard deviation and beta of this portfolio?