Please see attached document, The questions are based on stock betas.

Please elaborate more on the questions answered and turn it into an essay form.

Stock A has a beta of 0.80, stock B has a beta of 1.40, and stock C has a beta of -0.30. 1) Question Rank these stocks from the riskiest to the least risky. Explain your reasoning and back up your explanation with research. Answer A. Stock B = 1.40 B. Stock A = 0.80 C. Stock C = -0.30 Beta is the measure of systematic risk associated with securities. Market has beta of one and in relation to market beta risk associated with the securities can be measured by comparing their beta with the market beta. Beta of more than one means the stock is more risky than the average risk associated with the market and there is high volatility in the return of the stock. Beta of stock B is 1.40 and is higher than one. This means stock B is the riskiest security of the three. Stock A has beta of 0.80 which means stock A has lower risk than the average market risk while stock C has negative beat which means its returns move in opposite direction of the market and can be proved as a assurance against the economic risks which affects market. 2) Question If the return on the market portfolio increases by 12%, what change in the return for each of the stocks would you expect? Explain your answer. Answer If the return of market portfolio increases by 12% then stock B will move in the same direction but will generate return higher than market return. Stock B will generate return of around 16.80% because of its higher than average beta. Stock A will also generate positive return and its return will also increase but at a rate lower than market rate. Its return will be somewhere around 9.60%. Stock C has negative beta and as a result its return will move in opposite direction. Return of stock C will decrease by around -3.60%, in the response to the positive market return. 3) Question If the return on the market portfolio declines by 5%, what change in the return for each of the stocks would you expect? Explain your answer. Answer If the market portfolio returns declines by 5% then stock B will also generate negative return. Return of stock B will decrease by -7% as a result of decline in market portfolio returns. This is because stock B has higher volatility in the return than the market. Return of stock A will also declines but at a lower rate and will decrease by 4%. This is because A has lower than average beta. But return of stock C will move in opposite direction due to the negative beta and stock C will generate positive return of 1.50%. 4) Question 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? Answer If the market is about to experience a significant decline, Stock C is the most suitable stock to add in the portfolio. This is because of its negative beta, which means return of stock C moves in the opposite direction to the market. So if there is likely fall in the market than the stock C will generate positive return and this makes it most suitable stock for investment. 5) Question If you anticipated a major stock market rally, which stock would you be most likely to add to your portfolio? Why? Answer If there is an anticipation of major stock rally, then Stock B is the most suitable stock to add in the portfolio. This is because it has the highest beta out of the three stocks and as a result there are chances that its return will be higher than the expected return of the market due to the anticipated stock rally. Whatever be the return generated by the market in the rally, stock B will provide return higher than that