You expect General Motors (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil (XOM) to be 0.9 over the next year. Also, you expect the volatility of General Motors to be 40% and that of Exxon Mobil to be 30% over the next year. Which stock has more systematic risk? Which stock has more total risk?

Question

Quizplus · Accepted Answer

Systematic risk is measured by beta, where a higher beta indicates more systematic risk. General Motors (GM) has a higher beta (1.3) compared to Exxon Mobil (XOM) with a beta of 0.9, indicating GM has more systematic risk. Total risk is measured by volatility, where GM has a higher volatility (40%) compared to XOM (30%), indicating GM also has more total risk.

You Expect General Motors (GM) to Have a Beta of 1.3