......................... Standard Deviation ........ Beta Security X ..........
ID: 1171876 • Letter: #
Question
......................... Standard Deviation ........ Beta
Security X .............. 0.35 ........................ 1.06
Security Y .............. 0.28 ........................ 1.45
Security Z .............. 0.44 ......................... 1.22
1) Which security has the greatest systematic risk?
Z because it has the largest standard deviation.
Y because it has the largest beta coefficient..
Z because it has a high beta and the largest standard deviation.
Y because it has the greatest diversifiable risk.
It is not possible to tell given the information above.
2) Which security has the greatest expected return?
Z because it has the highest standard deviation.
Z because it has the highest ratio of standard deviation to beta.
Y because it has the highest beta.
X because it has the lowest beta coefficient, and therefore the lowest systematic risk.
It is not possible to tell given the information above.
A.Z because it has the largest standard deviation.
B.Y because it has the largest beta coefficient..
C.Z because it has a high beta and the largest standard deviation.
D.Y because it has the greatest diversifiable risk.
E.It is not possible to tell given the information above.
Explanation / Answer
Which security has the greatest systematic risk
answer-Y because it has the largest beta coefficient.
Which security has the greatest expected return?
Answer -Y because it has the highest beta. (as risk is directly proportional to the expected return)
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