Assume that the risk-free rate of return is 3% and the market risk premium is 6%. A portfolio contains the following three stocks:

Stock	Average returns	Standard deviation of returns	CAPM beta	Weight in portfolio
Stock A	0.05	0.15	1.90	0.35
Stock B	0.09	0.37	2.80	0.50
Stock C	0.02	0.42	0.20	0.15

Which of the following two statements is(are) correct?

S1: Stock C has the highest amount of undiversifiable risk

S2: Stock B has the highest amount of stand-alone risk.

Group of answer choices

Both statements are false

S1 is correct but S2 is false

S2 is correct but S1 is false

Both statements are correct

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Question 51 pts

Using the information in question 4, which of the following statements is correct?

S1: The coefficient of variation of stock A is 3.00.

S2: Based on the coefficient of variation, stock A provides a better risk/return tradeoff for investors than stock B.

Group of answer choices

S1 is correct but S2 is false

Both statements are false

S2 is correct but S1 is false

Both statements are correct