$$\begin{array} { | c | c | c | }
\hline \text { Asset } & \begin{array} { c }
\text { Expected } \
\text { Return }
\end{array} & \text { Beta } \
\hline \text { Stock A } & 9 \% & 0.9 \
\hline \text { Stock B } & 11 \% & 1.4 \
\hline \text { Risk-Free Asset } & 5 \% & \
\hline
\end{array}$$ Consider the assets outlined in the table above. Which asset offers the best risk-return trade-off?
A)Stock A
B)Stock B
C)The risk-free asset
D)Either Stock A or Stock B as both have the same risk-return trade-off

Question

$$\begin{array} { | c | c | c | } 
\hline \text { Asset } & \begin{array} { c } 
\text { Expected } \
\text { Return }
\end{array} & \text { Beta } \
\hline \text { Stock A } & 9 \% & 0.9 \
\hline \text { Stock B } & 11 \% & 1.4 \
\hline \text { Risk-Free Asset } & 5 \% & \
\hline
\end{array}$$ Consider the assets outlined in the table above. Which asset offers the best risk-return trade-off?
A)Stock A
B)Stock B
C)The risk-free asset
D)Either Stock A or Stock B as both have the same risk-return trade-off

Quizplus · Accepted Answer

Stock A has a lower beta (0.9) compared to Stock B (1.4), indicating it is less risky. Given its expected return of 9%, it offers a better risk-return trade-off compared to Stock B, which has a higher risk for a slightly higher return.

Consider the Assets Outlined in the Table Above