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Suppose that in the coming year,you expect Exxon-Mobil stock to have a volatility of 42% and a beta of 0.9,and Merck's stock to have a volatility of 24% and a beta of 1.1.The risk-free interest rate is 4% and the market's expected return is 12%.
-Which stock has the highest systematic risk?
A)Merck since it has a higher beta
B)Exxon-Mobil since it has a lower beta
C)Exxon-Mobil since it has a higher volatility
D)Merck since it has a lower volatility

Question

Quizplus · Accepted Answer

Systematic risk is measured by beta, which reflects the stock's sensitivity to market movements. Therefore, the stock with the higher beta, Merck, has the highest systematic risk. The stock's volatility, on the other hand, only measures its total risk,including both systematic and unsystematic risk.

Use the Information for the Question(s)below