Stock A’s beta is 1.1 and Stock B’s beta is 2. Which of the following statements must be true, assuming the CAPM is correct?
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In equilibrium, the expected return on Stock B will be greater than that on Stock A.
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In equilibrium, the expected return on Stock A will be greater than that on Stock B.
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Stock B would be a more desirable addition to a portfolio than Stock A.
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Stock A would be a more desirable addition to a portfolio than Stock B.