Homework SourseIf the value of technology stocks is more sensitive to econo
If the value of technology stocks is more sensitive to economic conditions than consumer staples stocks (e.g. Coca Cola), what can we conclude about the relative risk and return of technology versus consumer staples stocks?
| A. Consumer staples stocks are riskier and have a higher expected return B. Technology stocks are riskier and have a higher expected return C. Consumer staples stocks are riskier and have a lower expected return D. Technology stocks are riskier and have a lower expected return | ||
Solution
If technology stocks are more sensitive to economic conditions, then they are riskier (since they are hugely affected by small economic change), and therefore require higher expected return, compared to consumer staples stock.
Correct option (B).
