Which one of the following statements is more likely to be correct concerning the comment, "Stock A has a higher expected return than Stock B"?
A) Stock A has more unique risk.
B) Stock B plots below the security market line.
C) Stock B is a cyclical stock.
D)Stock A has a higher beta.

Question

Quizplus · Accepted Answer

The statement "Stock A has a higher expected return than Stock B" implies that Stock A is expected to have a higher return for the amount of risk taken. One commonly used measure of risk is beta, which measures a stock's sensitivity to market movements. Thus, Stock A likely has a higher beta than Stock B. None of the other options mentioned are necessarily related to the expected return of the stocks.

Which One of the Following Statements Is More Likely to Be