Stock A has a beta of 1.2 and a standard deviation of 25% . Stock B has a beta o
ID: 2750071 • Letter: S
Question
Stock A has a beta of 1.2 and a standard deviation of 25%.
Stock B has a beta of 1.4 and a standard deviation of 20%.
Portfolio AB was created by investing in a combination of Stocks A and B.
Portfolio AB has a beta of 1.25 and a standard deviation of 18%.
Which of the following statements is CORRECT?
OPTIONS:
Portfolio AB has more money invested in Stock B than in Stock A.
Stock A has more market risk than Stock B but less stand-alone risk.
Portfolio AB has more money invested in Stock A than in Stock B.
Portfolio AB has the same amount of money invested in each of the two stocks.
Stock A has more market risk than Portfolio AB.
A)Portfolio AB has more money invested in Stock B than in Stock A.
B)Stock A has more market risk than Stock B but less stand-alone risk.
C)Portfolio AB has more money invested in Stock A than in Stock B.
D)Portfolio AB has the same amount of money invested in each of the two stocks.
E)Stock A has more market risk than Portfolio AB.
Explanation / Answer
Portfolio AB has more money invested in Stock A than in Stock B.. since Beta of portfolio is 1.25 weight of A is more than B. If weights are Equal portfolio beta =1.3
C)Portfolio AB has more money invested in Stock A than in Stock B.. since Beta of portfolio is 1.25 weight of A is more than B. If weights are Equal portfolio beta =1.3
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