Multiple Choice
Based on the security market line,Robo-Tech stock has a required return of 14% and Friendly Insurance Company has a required return of 10%.Robo-Tech has a standard deviation of returns of 18%.Therefore,
A) Friendly must have a standard deviation of returns of less than 18% because Friendly is less risky than Robo-Tech.
B) all rational investors will prefer Friendly over Robo-Tech.
C) for a well-diversified investor, Friendly is less risky than Robo-Tech.
D) the beta for Friendly must be greater than the beta for Robo-Tech because Friendly is the better buy for a risk-averse investor.
Correct Answer:
Verified
Correct Answer:
Verified
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