Stock A has a beta of 1.2 and a standard deviation of 20%. Stock B has a beta of 0.8 and a standard deviation of 25%. Portfolio P has $200,000 consisting of $100,000 invested in Stock A and $100,000 in Stock B. Which of the following statements is CORRECT? (Assume that the stocks are in equilibrium.) a. Portfolio P has a beta of 1.0. b. Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns. c. Stock B has a higher required rate of return than Stock A. d. More information is needed to determine the portfolio's beta. e. Portfolio P has a standard deviation of 22.5%.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Stock A has a beta of 1.2 and a standard deviation of 20%. Stock B has a beta of 0.8 and a standard deviation of 25%. Portfolio P has $200,000 consisting of $100,000 invested in Stock A and $100,000 in Stock B. Which of the following statements is CORRECT? (Assume that the stocks are in equilibrium.)

a.
Portfolio P has a beta of 1.0.
b.
Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns.
c.
Stock B has a higher required rate of return than Stock A.
d.
More information is needed to determine the portfolio's beta.
e.
Portfolio P has a standard deviation of 22.5%.
Clear my choice
 
 
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