Q7B.

Expert-verifiedFound in: Page 225

Book edition
9th

Author(s)
Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus

Pages
748 pages

ISBN
9780078034695

**Kaskin, Inc., stock has a beta of 1.2 and Quinn, Inc., stock has a beta of .6. Which of the following statements is most accurate?**

**a. The expected rate of return will be higher for the stock of Kaskin, Inc., than that of**

**Quinn, Inc.**

**b. The stock of Kaskin, Inc., has more total risk than Quinn, Inc.**

**c. The stock of Quinn, Inc., has more systematic risk than that of Kaskin, Inc.**

**a. Correct**

**b. Not accurate**

**c. Not accurate**

Beta for stock Kaskin, Inc. = 1.2

Beta for Quinn, Inc. = 0.6

According to expected return equation, the beta is directly proportional to expected rate of return. Since Beta of Kaskin, Inc. = 1.2 that is higher than Quinn, Inc. = 0.6, therefore the statement is correct.

Since the data for only systematic risk is given, It cannot form the basis for commenting on the total risk of asset. Therefore the statement is not accurate.

Since the Beta value or the systematic risk for Stock Kaskin Inc.(1.2 )is higher than Stock Quinn Inc. (0.6) Therefore the statement is not accurate.

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