Multiple Choice
Portfolio AB was created by investing in a combination of Stocks A and B. 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 has a beta of 1.25 and a standard deviation of 18%. Which of the following statements is CORRECT?
A) stock a has more market risk than stock b but less stand-alone risk.
B) portfolio ab has more money invested in stock a than in stock b.
C) portfolio ab has the same amount of money invested in each of the two stocks.
D) portfolio ab has more money invested in stock b than in stock a.
E) stock a has more market risk than portfolio ab.
Correct Answer:
Verified
Correct Answer:
Verified
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