quiz5 - FIN 3403 Quiz 5 Chapter 5 Beta coefficient i....

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FIN 3403 Quiz 5 – Chapter 5 Beta coefficient Answer: d Diff: E i . Stock A has a beta of 1.5 and Stock B has a beta of 0.5. Which of the following statements must be true about these securities? (Assume the market is in equilibrium.) a. When held in isolation, Stock A has greater risk than Stock B. b. Stock B would be a more desirable addition to a portfolio than Stock A. c. Stock A would be a more desirable addition to a portfolio than Stock B. d. The expected return on Stock A will be greater than that on Stock B. e. The expected return on Stock B will be greater than that on Stock A. Portfolio risk Answer: b Diff: E ii . Stock A and Stock B both have an expected return of 10 percent and a standard deviation of 25 percent. Stock A has a beta of 0.8 and Stock B has a beta of 1.2. The correlation coefficient, r, between the two stocks is 0.6. Portfolio P is a portfolio with 50 percent invested in Stock A and 50 percent invested in Stock B. Which of the following statements is most correct? a. Portfolio P has a coefficient of variation equal to 2.5. b.
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This note was uploaded on 08/24/2008 for the course ACG 2102 taught by Professor Hill during the Spring '07 term at UNF.

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quiz5 - FIN 3403 Quiz 5 Chapter 5 Beta coefficient i....

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