Question 71 CAPM, risk
Stock A has a beta of 0.5 and stock B has a beta of 1. Which statement is NOT correct?
(a) Stock A has less systematic risk than stock B, so stock A's return should be less than stock B's.
(b) Stock B has the same systematic risk as the market, so its return should be the same as the market's.
(c) Stock B has the same beta as the market, so it also has the same total risk as the market.
(d) If stock A and B were combined in a portfolio with weights of 50% each, the beta of the portfolio would be 0.75.
(e) Stocks A and B have more systematic risk than the risk free security (government bonds) so their return should be greater than the risk free rate.
Copyright © 2014 Keith Woodward