Question

If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in: A. high beta stocks. B. low beta stocks. C. stocks with large amounts of unique risk. D. stocks that plot below the security market line.

Answer 1

A is the correct option.

Step-by-step explanation:

Beta is the measure of stock's volatility in the market. If the stocks are moving less than the market then the stock beta is less than 1. High beta stocks are riskier. But they also provide high returns. They are less risky and also lower returns. Growth investors with a high risk of tolerance are interested in looking for high growth high beta stocks.