Stock a Has a Beta of 1

Multiple Choice

Stock A has a beta of 1.2 and a standard deviation of 20 percent. Stock B has a beta of 0.8 and a standard deviation of 25 percent. Portfolio P is a $200,000 portfolio consisting of $100,000 invested in Stock A and $100,000 invested in Stock B. Which of the following statements is most correct? (Assume that the required return is determined by the Security Market Line.)

A) Stock B has a higher required rate of return than stock A.
B) Portfolio P has a standard deviation of 22.5 percent.
C) Portfolio P has a beta equal to 1.0.
D) Statements a and b are correct.
E) Statements a and c are correct.