Which security has the greatest expected return?
A) Y because it has the largest standard deviation.
B) X because it has the largest beta coeﬃcient.
C) Z because it has the highest ratio of standard deviation to beta.
D) Y because it has the lowest beta coeﬃcient, and therefore the lowest risk.
E) It is not possible to tell given the information above.

Question

Quizplus · Accepted Answer

The expected return of a security is often associated with its beta coefficient, which measures its sensitivity to market movements. A higher beta typically indicates a higher expected return, assuming the market risk premium is positive.

Which Security Has the Greatest Expected Return