Question: 1 - What is beta? 2 - Stock ABC has a beta of 1.25 and Stock XYZ has a beta of 0.55. Which stock would

1 - What is beta?

2 - Stock ABC has a beta of 1.25 and Stock XYZ has a beta of 0.55. Which stock would you buy if you knew the stock market was going to drop by 20% over the next month? Also, briefly explain why.

3 - What is the relationship between the market risk of a stock and its expected return?

4 - What is the CAPM? What does it tell you?

5 - What is the difference between beta and standard deviation?

Directions: Please write brief (3-5 sentences) responses to each of the above questions.

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