The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index Excess Returns Stock A Excese Returns Stock B F PHYS Af Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock? Multiple Choice Stock A Stock B There is no difference between A or B The answer cannot be determined from the information given.
The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index Excess Returns Stock A Excese Returns Stock B F PHYS Af Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock? Multiple Choice Stock A Stock B There is no difference between A or B The answer cannot be determined from the information given.
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
Section: Chapter Questions
Problem 1PS
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Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.
RA-IT
Excess Returns Stock A
RM-f
Excess Returns Stock B
RM-f
Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?
Multiple Choice
Stock A
Stock B
There is no difference between A or B.
The answer cannot be determined from the information given.
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