You are considering three stocks-a b and c-for possible


You are considering three stocks-A, B, and C-for possible inclusion in your investment portfolio. Stock A has a beta of 0.80, stock B has a beta of 1.40, and stock C has a beta of 0.30.

a. Rank these stocks from the most risky to the least risky.

b. If the return on the market portfolio increased by 12%, what change would you expect in the return for each of the stocks?

c. If the return on the market portfolio decreased by 5%, what change would you expect in the return for each of the stocks?

d. If you felt that the stock market was getting ready to experience a significant decline, which stock would you probably add to your portfolio? Why?

e. If you anticipated a major stock market rally, which stock would you add to your portfolio? Why?

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Finance Basics: You are considering three stocks-a b and c-for possible
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