Practice Quiz

FINRA Series 6

Category - Series 6

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Anna Lyst observes that the beta of a certain stock is 0.8. This means that:
  1. if the S&P 500 Index loses 10%, this stock can be expected to lose 8%.
  2. the stock is 80% more volatile than the S&P 500 Index.
  3. if the S&P 500 Index is up 10%, this stock can be expected to lose 8%.
  4. the stock is riskier than the overall market.
Explanation
Answer: A - If the beta of a stock is 0.8, it means that if the S&P 500 Index loses 10%, this stock can be expected to lose 8%. Beta is a measure of how a stock or a portfolio of stocks moves with the overall market, and the S&P 500 Index is commonly used as a proxy for the overall market. A beta of 0.8 means that the stock is less risky than the market, which has a beta of 1.0.
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