Which of the following statements is CORRECT A A stocks beta

Which of the following statements is CORRECT? A) A stock\'s beta indicates its diversifiable risk. B) A stock\'s market risk can be diversified if you hold more securities in a portfolio. If one stock is held in a well-diversifed portfolio, we will focus on its beta instead of stand- C) alone risk ?. D Two securities with the same stand-alone risk must have the same betas. E) Lower beta stocks have higher required returns

Solution

Ans : C

A stock’s beta is the volatility of the stock as compared to the market, that is how much the price will change with a movement in the market .This risk is not diversifiable .If one stock is held in a well diversified portfolio , we will focus on its its beta to determine its market risk.