Question

Stock A has an expected return of 13% and a standard deviation of 22%, while Stock B has an expected return of 15% and a standard deviation of 25%. If an investor is less risk-averse, they will be likely to choose…

A. Stock A

B. Stock B

Stock A has a beta of 1.8 and an expected return of 12%. Stock B has a beta of 0.7 and an expected return of 7%. If the risk-free rate is 2% and the expected market return is 8%, what is true about the two stocks?

A. Both stocks are overpriced

B. Both stocks are underpriced

C. Stock A is underpriced and stock B is overpriced

D. Stock A is overpriced and stock B is underpriced

E. Both stocks are correctly priced You have a portfolio with $20,000 invested in Stock A with a beta of 1.2, $30,000 in Stock B with a beta of 0.8, and $30,000 in Stock C with a beta of 1.1.

Should you invest $20,000 in Stock D with a beta of 1.6 and an expected return of 13% if the risk-free rate is 3% and the expected market return is 9%?

A. Yes

B. No

C. Not enough information to answer

Answer 1