Question
Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true, according to
Stock X has a beta of 0.5 and Stock Y has a beta of 1.5. Which of the following statements must be true, according to the CAPM?
a. | If you invest $50,000 in Stock X and $50,000 in Stock Y, your 2-stock portfolio would have a beta significantly lower than 1.0. |
b. | Stock Y's realized return during the coming year will be higher than Stock X's return. |
c. | If the expected rate of inflation increases but the market risk premium is unchanged, the required returns on the two stocks should increase by the same amount. |
d. | Stock Y's return has a higher standard deviation than Stock X. |
e. | If the market risk premium declines, but the risk-free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y. |
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