Question: 34. The following (annual) data are given for expected return and standard deviation of two stocks: Stocks Exp. Return Standard dev. Beatles 5% 3% RollingStones

34. The following (annual) data are given for expected return and standard deviation of two stocks:

Stocks	Exp. Return	Standard dev.
Beatles	5%	3%
RollingStones	6%	5%

Moreover, the risk-free rate is 3%. Assume the CAPM holds and thus systematic risk is measured with beta. The two stocks lie on the Security Market Line (SML). The expected return on the market portfolio is 9%. Which statement is FALSE? A) The systematic risk of RollingStones is higher than the systematic risk of Beatles. B) The total risk of RollingStones is higher than the total risk of Beatles. C) The beta of Beatles stock equals 12 and the beta of RollingStones stock is 2/3. D) An equally weighted portfolio between both stocks earns on average 5.5% return. Ans: C

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