If Stock A has a higher expected return than Stock B, which of the following statements...
If Stock A has a higher expected return than Stock B, which of the following statements is most likely?
Multiple Choice
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Stock A has more specific risk.
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Stock B plots below the security market line.
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Stock B is a cyclical stock.
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Stock A has a higher beta.
Homework Answers
Ans Stock A has a higher beta.
| Expected Return = | Risk free Return + (Market Return - Risk free return)* Beta |
When the beta increases, the expected return also increases. So, If Stock A has a higher expected return than Stock B the Stock A has a higher beta.
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