Walmart, McDonalds, and Barrick Gold (a gold mining company) all have a beta of

Question

Walmart, McDonalds, and Barrick Gold (a gold mining company) all have a beta of 0.4. Which of the following are true?

I. Walmart, McDonalds, and Barrick Gold have identical expected returns because they have identical systematic risk.

II. Barrick Gold has a higher expected return than McDonalds and Walmart because gold prices are more volatile than demand for Big Macs or discounted goods.

III. Walmart, McDonalds, and Barrick Gold are plotted at the same point on the Security Market Line.

a) I only b) III only

c) I and II only

d) II and III

e) I and III only

Explanation / Answer

The correct answer is option B.

As the three company stock have same beta they will be plotted at the same point on the security market line.

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