Question:

Finance home work problems?

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Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is CORRECT?

A portfolio consisting of $50,000 invested in Stock X and $50,000 invested in Stock Y will have a required return that exceeds that of the overall market.

If the market risk premium decreases (but expected inflation is unchanged), the required return on both stocks will decrease but the decrease will be greater for Stock Y.

If expected inflation increases (but the market risk premium is unchanged), the required return on both stocks will decrease by the same amount.

Stock Y must have a higher expected return and a higher standard deviation than Stock X.

If expected inflation decreases (but the market risk premium is unchanged), the required return on both stocks will decrease but the decrease will be greater for Stock Y.

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  1. Hi- I am lookign at these answers and I am wondering if your problem would allow more than one to be correct?

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