Question

You have developed the following data on three stocks: Stock A has a standard deviation of .15 and a Beta of .79. Stock B has a standard deviation of .25 and a Beta of .61. Stock C has a standard deviation of .20 and a Beta of 1.29. If you are a risk minimizer, you should choose Stock _____ if it is to be held in isolation and Stock _____ if it is to be held as part of a well-diversified portfolio.

Answer 1

B. A;B

Step-by-step explanation:

Options includes.

A. A;A

B. A;B

C. B;A

D. C;A

E. C;B.

For Stock in Isolation Standard Deviation should be chosen Hence Stock A must be chosen.

For Stock in a well diversified portfolio lower the beta higher is the standard deviation of a well diversified portfolio. Should B should be chosen.