Assume that stocks are in equilibrium

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Stock A has a beta of 1.2 and a standard deviation of 20%. Stock B has a beta of 0.8 and a standard deviation of 25%. Portfolio P is a $200,000 portfolio consisting of $100,000 invested in Stock A and $100,000 invested in Stock B. Which of the following statements is correct? (Assume that stocks are in equilibrium.)

a. Stock B has a higher required rate of return than Stock A.

b. Portfolio P has a standard deviation of 22.5%.

c. Portfolio P has a beta equal to 1.0.

d. More information is needed to determine the portfolio's beta.

e. Stock A's returns are less highly correlated with the returns on most other stocks than are B's returns.

Reference no: EM131589889

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