Stock A has a beta of 1.2, and stock B has a beta of 1. The returns of stock A are ________ sensitive to changes in the market than are the returns of stock B.
A) 20% more
B) slightly more
C) 20% less
D) slightly less

Question

Quizplus · Accepted Answer

A stock with a beta greater than 1 is considered more sensitive to market changes, while a stock with a beta less than 1 is considered less sensitive to market changes. Stock A has a beta of 1.2 which means it is more sensitive to market changes, making its returns 20% more sensitive than the returns of stock B with a beta of 1.

Stock a Has a Beta of 1