CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

A stock with a beta of 1.5 should have a ______ required rate of return than the market and a ______ required rate of return than a stock with a beta of 2.

A. lower; lower
B. higher; lower
C. lower; higher
Correct Answer: B

User Contributed Comments 5

User Comment
tanyak Does more volatile actually mean higher return? Do we assume that more volatility=higher returns?
accounting yes
JVAC more volatility->more risk->more expected return
hannovanwyk the expected return they talking about here is the required return, LOS stated that its the same thing.

hence, higher risk = higer required return to justify the risk taken.
bmeisner You have to remember what the CAPM model assumptions are. Every investor expects the same return for a given level of risk, hence more risk means higher expected return. In real life this is not the case because everyone has different expectations and there is asymmetry of information.
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