Question

Which of the following stocks is likely to be the most sensitive to market fluctuations?

- A stock with a high standard deviation
- A stock with a high beta
- A stock with a low correlation with the market
- A stock with a low standard deviation
- A stock with a low beta

Answer #1

**Answer : A stock with a high beta**

beta measures a stock’s volatility relative to the market as a whole, not for a single stock only. Beta is measure of the fund’s volatility relative to other funds in the market. That is, it measurers the market sensitivity. Low beta indicates low volatility and vice versa.

Standard deviation measures the risk of individual stocks that is a fund’s volatility. The volatility is measured by its standard deviation of returns over a short period of time. It indicates the tendency of the returns to rise or fall in a short span of time. A stock with high volatility will have a high standard deviation and vice versa.

Correlation measures how assets move in relation to each other. High correlation indicates high volatility of stocks with each other. It measures the tendency of two stocks to move in the same direction.

Which of the following is most accurate:
Select one or more:
a. a stock with a high standard deviation will always have a
high coefficient of variation
b. a stock with a high standard deviation will probably have a
low coefficient of variation
c. a stock with a high standard deviation will probably have a
low return
d. a stock with a high standard deviation will always have a
high return
e. a stock with a high standard deviation will...

Which of the following Statements is most accurate?
The greater the number of stocks in a stock portfolio, the
harder it would be to outperform a market index like the S&P
500
The greater the number of stocks in a stock portfolio, the
higher the beta of the portfolio
The greater the number of stocks in a stock portfolio, the lower
the portfolio's systematic risk
The beta of a sock portfolio will increase any time that one or
more of...

Which of the following is most likely to have a low (e.g. 0.2)
beta?
A biotech company awaiting FDA approval
An index fund following the S&P 500
A high-end jewelry store
An insulin (diabetes drug) producer

Suppose stocks offer an expected rate of returns of 10% with a
standard deviation of 20%, and gold offers an expected return of 5%
with a standard deviation of 25%. (i) If the correlation between
gold and stocks is sufficiently low, gold ______ be held as a
component in the optimal portfolio. (ii) If the correlation
coefficient between gold and stocks is 1.0, then gold ______ be
held as a component in the optimal
portfolio.
Question 1 options:
A)
(i)...

Which of the following
statements is CORRECT?
Select one:
a. Collections Inc. is in the business of collecting past-due
accounts for other companies, i.e., it is a collection agency.
Collections' revenues, profits, and stock price tend to rise during
recessions. This suggests that Collections Inc.'s beta should be
quite high, say 2.0, because it does so much better than most other
companies when the economy is weak.
b. Suppose the returns on two stocks are negatively correlated.
One has a...

1. Two stocks have the following
possible outcomes:
Outcome
Probability
Stock W
Market
Stock X
1
.15
+2%
+7%
+25%
2
.15
+18%
+4%
+10%
3
.40
+9%
+8%
+14%
4
.15
-12%
-9%
+3%
5
.15
+8%
-2%
-10%
a. What is the expected return for
each stock and the Market?
b. What is the standard deviation for
each stock and the Market?
c. What is the correlation between
the stocks, and each stock and the Market?
d....

Which of the following statements regarding bond prices and
market interest rates are most likely to be true? Interest rate
risk can be described as the changes in market interest rates that
will cause fluctuations in a bond’s price. Bond prices and market
interest rates are negatively related to each other. Coupon paying
bonds will trade at a premium to their face value because of the
future cash flows expected by bond investors.

25. Which of the following is most likely to be qualified as a
perfectly competitive market?
a. Airline industry
b. Stock market
c. Gas station
d. Power utility industry

Consider the following expectations for the market and two
particular stocks in two possible equally likely states:
(Please show the work step by step)
State
Market
Return
Stock
A
Stock B
Boom
25% 38% 12%
Recession 5% -2%
6%
A. What is the beta of each stock? Remember that beta can be
computed as the covariance of the stock’s return with the market
return divided by the variance of the market return.
B. What is the expected return on each...

Suppose that the CAPM is the correct model of expected returns.
Which of the following stocks will have the highest expected
return?
Group of answer choices
A stock with beta of 0.8 and a standard deviation of returns
equal to 20%
A stock with beta of 0.65 and a standard deviation of returns
equal to 27.5%
A stock with beta of 0.5 and a standard deviation of returns
equal to 35%
A stock with beta of 0.6 and a standard...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 3 minutes ago

asked 9 minutes ago

asked 13 minutes ago

asked 15 minutes ago

asked 16 minutes ago

asked 32 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago