$4$

Multiple Arriner

$2$ points.

Stock $x$ has a beta of $0\mathrm{.}7$ and Stock $Y$ has a beta of $1\mathrm{.}7.$ Which of the following statements must be true, according to the CAPM?

Stock Y$\text{'}$s realized return during the coming year will be higher than Stock X$\text{'}$s return.

If the expected rate of inflation increases but the market risk premium is unchanged, the required returns on the two stocks should increase by the same amount.

Stock Y$\text{'}$s return has a higher standard deviation than StockX.

If the market rik premium declines, but the risk$-$free rate is unchanged, Stock X will have a larger decline in its required return than will Stock Y $.$

If you invest $$50,000$ in Stock $x$ and $$50,000$ in Stock $Y,$ your $2-$stock portfollo would have a beta slanificantly lower than $1\mathrm{.}0,$ provided the reburns on the two stocks are not perfectly correlated.