According to the following information,which of the stocks would be considered riskiest in a diversified portfolio of investments?
A) Stock MNO, because it has the highest standard deviation.
B) Stock TUV, because it has the highest beta.
C) Stock FGH, because it has the highest s/b ratio
D) Stock ABC, because its beta is the same as the market beta (1.0) and the market is always very, very risky.

Question

According to the following information,which of the stocks would be considered riskiest in a diversified portfolio of investments? 
A) Stock MNO, because it has the highest standard deviation. 
B) Stock TUV, because it has the highest beta. 
C) Stock FGH, because it has the highest s/b ratio 
D) Stock ABC, because its beta is the same as the market beta (1.0) and the market is always very, very risky.

Quizplus · Accepted Answer

The stock with the highest beta (TUV) is considered riskier in a diversified portfolio because it is more sensitive to market fluctuations. The higher the beta, the higher the risk. The standard deviation (option A) and s/b ratio (option C) do not necessarily determine risk in the same way that beta does. Option D is incorrect because a beta of 1.0 means that the stock moves in line with the market, not necessarily that it is the riskiest option.

According to the Following Information,which of the Stocks Would Be