Your friend is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. She is highly risk averse and has asked for your advice. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%, are in equilibrium, and are equally correlated with the market, with r = 0.75. However, Stock A's standard deviation of returns is 12% versus 8% for Stock B. Which stock should this investor add to his or her portfolio, or does the choice not matter?
A. Stock A.
B. Stock B.
C. Neither A nor B, as neither has a return sufficient to compensate for risk.
D. Add A, since its beta must be lower.
E. Either A or B, i.e., the investor should be indifferent between the two.
Answer: B
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The Division of ________ supervises investigations and the initiation of injunctive actions
A) Market Regulation B) Corporation Finance C) Enforcement D) Investment Management
John loans George money and they sign a written agreement whereby George will repay John in monthly installments. Is this loan subject to the Truth-in-Lending Act?
a. Yes, if the loan is for more than $1,000. b. Yes, if John and George live in different states. c. No, if John is not in the business of offering credit. d. No, if John and George are related.
People in organizations have the ability to learn through the observation of others, according to
A. bounded rationality. B. the rational decision-making model. C. social learning theory. D. selective perception. E. behavior modeling training.
Bianca is CEO of That Special Something, a chain of fifteen, upscale gift shops in the western United States. She wants to expand her profits, and keep customers in the store for longer periods of time, by adding a small coffee and dessert shop to each store. With this in mind, Bianca is considering partnering with another company. Of the five candidates under consideration, the best choice would be the company
A. run by a CEO who insists on keeping full control of the coffee shops' marketing, staffing, and other elements. B. that offers coffee and baked goods at the lowest price, with an emphasis on maximizing profits and customer turnover. C. with a go-with-the-flow attitude and a goal to turn a $2 million profit by the end of the first year. D. that specializes in gourmet coffee and treats and is interested in helping host after-hours dessert and shopping events. E. that wants Bianca to handle all aspects of management related to the in-store coffee shops.