Question

Which of the following stocks has the highest risk? A. stock a with a beta equal to 0.0 B. stock b with a beta equal to 0.5 C. stock c with a beta equal to 1.0 D. stock d with a beta equal to 2.0

Answer 1

Answer:

Option D, stock d with a beta equal to 2.0, is the right answer.

Explanation:

Option D has the highest risk because the magnitude of beta represents the risk involved or associated with the stock. So, higher the beta magnitude, higher is the risk associated with stock and higher is the return. While lower value shows the lower risk and lower return on the stock. Therefore, option D has the highest magnitude so this stock has the highest risk.