The risk-free security has a beta equal to ________ , while the market portfolio's beta is equal to _______. more than one ; one less than one; one zero; one less than zero; more than zero
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The risk-free security has a beta equal to ________ , while the market portfolio's beta is equal to _______.
more than one ; one
less than one; one
zero; one
less than zero; more than zero
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- 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.What is the expected return on a security with beta equal to zero? The market rate of return. Zero rate of return. A negative rate of return. The risk-free rate. None of the above.The beta of a market-neutral portfolio is zero. O True O False
- What is the expected return of a zero-beta security?a. Market rate of return.b. Zero rate of return.c. Negative rate of return.d. Risk-free rate of return.A risk-free asset by definition has a beta of zero. OA. True OB. FalseA risky security has less risk than the overall market. What must the beta of this security be? O 0 but< 1 O 1 O The beta cannot be determined based on the information provided.
- The beta of the risk free security is: a) 0 b) > 0 but < 1 c) 1 d) > 1multiple choice, Security X has an expected rate of return E(R) of 0.11 and a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.08. According to the Capital Asset Pricing Model (CAPM), this security is underpriced. overpriced. fairly priced. cannot be determined from data provided.Assume that security returns are generated by the single-index model,Ri = αi + βiRM + eiwhere Ri is the excess return for security i and RM is the market’s excess return. The risk-free rate is 2%. Suppose also that there are three securities A, B, and C, characterized by the following data: Security βi E(Ri) σ(ei) A 0.7 7 % 20 % B 0.9 9 6 C 1.1 11 15 a. If σM = 16%, calculate the variance of returns of securities A, B, and C. b. Now assume that there are an infinite number of assets with return characteristics identical to those of A, B, and C, respectively. What will be the mean and variance of excess returns for securities A, B, and C? (Enter the variance answers as a percent squared and mean as a percentage. Do not round intermediate calculations. Round your answers to the nearest whole number.)
- Which of the following statements about the Security Market Line are correct? I. The intercept point is the market rate of return. II. The slope of the line is beta. III. An investor should accept any return located above the SML line. IV. A beta of 0.0 indicates the risk-free rate of returnWhich one of the following is the slope of the security market line? Market risk premium Risk-free rate Beta coefficientAssume that a security is fairly priced and has an expected rate of return of 0.13. The market expected rate of return is 0.13, and the risk-free rate is 0.04. The beta of the stock is A. 1.7. B. 0.95. C. 1. D. 1.25.