Stock A has a beta coefficient of 0.9, and stock B has a beta coefficient of 1.2

Question

Stock A has a beta coefficient of 0.9, and stock B has a beta coefficient of 1.2. Which of the following statements is FALSE regarding these two stocks?
A) Stock A is less risky from the market’s perspective than a typical stock, and stock B is more risky than a typical stock.
B) Stock B, if purchased, will increase the market risk of a portfolio more than stock A would (if purchased).
C) Stock A necessarily must have a lower standard deviation of returns than stock B.
D) Stock B must have a higher expected return than stock A if markets are efficient.
E) Stock A has the same reward to risk ratio as stock B.

Explanation / Answer

sol:C)Stock A necessarily must have a lower standard deviation of returns than stock B.

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