SIE Exam Question 983: Answer and Explanation

Question: 983

A stock with a beta of -1.5 and a standard deviation of 10.1 will change in which of the following ways if the stock market increases 8%?

• A. Increase by 4%
• B. Increase by 8%
• C. Decrease by 10%
• D. Decrease by 12%

Correct Answer: D

Explanation:

8% × -1.5 = -12%

A stock with a beta of -1.5 will move 150% in the opposite direction of the market. Therefore, if the stock market increases by 8%, the stock will decrease by 12%.