Betas and risk rankings Thomas Hill is considering three stocks—A, B, and C—for possible inclusions in his existing portfolio. Stock A has a beta of 0.75, stock B has a beta of 1.60, and stock C has a beta of -0.50.

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

b. If the return on the market portfolio increased by 15%, what change would you expect in the return for each stock?

c. If the return on the market portfolio decreased by 10%, what change would you expect in the return for each stock?

d. If you believed 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?