Question

You have the following data on three stocks: Stock Standard Deviation Beta A 20% 0.59 B 10% 0.61 C 12% 1.29 If you are a strict risk minimizer, you would 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. Group of answer choices C; B. A; B. A; A. B; A. C; A.

Answer 1

B; A.

Step-by-step explanation:

A minimizer of risk is going to pick stock B for the following reason, it has the lowest standard deviation. this measures the risks facing this investor. For a well diversified portfolio this minimizer of risk is going to go for stick option A. the reason is that, it would add lowest risk. A well diversified portfolio investor is not going consider standard deviation due to things that are of irrelevance like unsystematic diversifiable risk.

If you are a strict risk minimizer, you would choose Stock B if it is to be held in isolation and Stock A if it is to be held as part of a well-diversified portfolio.

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