Stock A has a required return of 19%. Stock B has a required return of 11%. Assume a risk-free rate of 4.75%. Which of the following is a correct statement about the two stocks?
A) Stock A is riskier.
B) Stock B is riskier.
C) The stocks have the same risk.
D) We would need to know if the markets are efficient to answer this question.

Question

Quizplus · Accepted Answer

Stock A has a higher required return than Stock B, which means the market is demanding a higher return to compensate for the higher risk. Therefore, Stock A is riskier than Stock B.

Stock a Has a Required Return of 19