(Answered) Stock a has a required return of 10 and a standard

Management Studies

Stock A has a required return of 10% and a standard deviation of 20%. Stock B has a required return of 13% and a standard deviation of 30%. The risk-free rate is 5% and the market risk premium is 6%.

Assume that the market is efficient. Portfolio AB has 50% invested in Stock A and 50% invested in Stock B. The returns of Stock A and Stock B are independent of one another, i.e., the correlation coefficient between them is zero, Which of the following is correct?

A. Stock A's Beta is 0.8333

B. Since the two stocks have zero correlation, portfolio AB is riskless

C. Stock B's Beta is 1.0

D. Portfolio AB 's required return is 11%.

My teacher told me the answer is A but I just dont get it.

Please explain why A is correct while D is wrong

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