Stock A has a beta of 0.8, stock B has a beta of 1.4, and stock C has a beta of -0.3.
a. Rank these stocks from the most risky to the least risky.
b. If the return on the market portfolio increases by 12%, what change in the return for each of the stocks would you expect?
c. If the return on the market portfolio declines by 5%, what change in the return for each of the stocks would you expect?
d. If you felt the stock market was about to experience a significant decline, which stock would you be most likely to add to your portfolio? Why?
e. If you anticipated a major stock market rally, which stock would you be most likely to add to your portfolio? Why?