00:02
Hello, this question is about beta of different stocks.
00:06
We know that in the stock market, systematic risk is common to all stocks.
00:14
And for this reason, it's also known as the market risk is non -diversifiable.
00:24
So, beta is the measure of systematic risk.
00:27
A beta of 1 is considered standard.
00:32
And the higher is the beta of a stock, the riskier that stock is and the more return it is expected to generate.
00:46
So using this, let's try to answer to your question.
00:53
And let's explore all answer options.
00:56
Let's start with a.
01:01
When held in isolation, stock a has more risk than stock b.
01:10
But it's not about isolation.
01:13
We compare stock a with stock b, so this one is not correct.
01:22
There is nothing about isolation, so we cannot just compare our risks.
01:29
Okay, answer b, stock b must be a more desirable addition to a portfolio than a.
01:39
We don't know about this, so we need the values of beta to compare the expected returns, but we don't know which stock is more desirable for different people.
01:55
Different agents are different, some of them prefer more riskier stocks, some of them, of them try to avoid risk so we don't know about this.
02:04
B is not correct.
02:06
C...