You have the following data on three stocks: $$\begin{array} { l l l }
\underline{\text { Stock } }& \underline{\text { Standard Deviation }} & \underline{\text { Beta } }\
\text { A } & 20 \% & 0.59 \
\text { B } & 10 \% & 0.61 \
\text { C } & 12 \% & 1.29
\end{array}$$ If you are a strict risk minimizer, you would choose Stock if it is to be held in isolation and Stock if it is to be held as part of a well-diversified portfolio.
A) A; A.
B) A; B.
C) B; A.
D) C; A.
E) C; B.

Question

You have the following data on three stocks: $$\begin{array} { l l l } 
\underline{\text { Stock } }& \underline{\text { Standard Deviation }} & \underline{\text { Beta } }\
\text { A } & 20 \% & 0.59 \
\text { B } & 10 \% & 0.61 \
\text { C } & 12 \% & 1.29
\end{array}$$ If you are a strict risk minimizer, you would choose Stock if it is to be held in isolation and Stock if it is to be held as part of a well-diversified portfolio.
A) A; A.
B) A; B.
C) B; A.
D) C; A.
E) C; B.

Quizplus · Accepted Answer

When held in isolation, Stock B has the lowest standard deviation, indicating it is the least risky. For a well-diversified portfolio, Stock A has the lowest beta, indicating it contributes the least market risk.

You Have the Following Data on Three Stocks If You Are a Strict Risk Minimizer, You Would Choose