The beta of a risk-free security is _____ and the beta of the overall market is _____: a. 0; 1. b. 0; 0. c. 1; 0. d. 1; 1.

The beta of a risk-free security is _ and the beta of the overall market is _: a. 0; 1. b. 0; 0. c. 1; 0. d. 1; 1.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 11QTD

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

100%

The beta of a risk-free security is _____ and the beta of the overall market is _____:

a. 0; 1.

b. 0; 0.

c. 1; 0.

d. 1; 1.

Expert Solution

Step 1

Beta of risk free security

Since does not fluctuate with or against the market, hence beta of risk free asset always remain 0.

Beta of market

Since market is a benchmark for calculating beta hence beta of market with the market will remain 1.

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