Question 1: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of -.3, and a beta coefficient of -1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation coefficient with the market of .7, and a beta coefficient of 1.0. Which security is riskier? Why?

Question 2: If investor's aversion to risk increased, would the risk premium on a high-beta stock increase by more or less than that on a low-beta stock? Explain.

Question 3: If a company's beta were to double, would its expected return double?