A beta of 1 means that the stock has no systematic risk and a beta of 0 means that the stock has the same systematic risk as the market. O False O True O No answer text provided. O No answer text provided.
A beta of 1 means that the stock has no systematic risk and a beta of 0 means that the stock has the same systematic risk as the market. O False O True O No answer text provided. O No answer text provided.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:**Question:**
A beta of 1 means that the stock has no systematic risk and a beta of 0 means that the stock has the same systematic risk as the market.
- ○ False
- ○ True
- ○ No answer text provided.
- ○ No answer text provided.
**Explanation:**
This question tests understanding of beta in stock market terms. Beta is a measure of a stock's volatility in relation to the overall market. A beta of 1 indicates that the stock's price is expected to move with the market. A beta of 0 means the stock is uncorrelated with the market, implying no systematic risk due to market movements. It seems there is an error in the statement provided and needs assessment of the described options.
Transcribed Image Text:**Understanding the Positive Relation Between Systematic Risk and Expected Return**
A plot or graph that illustrates the positive relationship between systematic risk and expected return is vital in finance. This concept is visually represented in one of the following options:
- **Security Market Line**: This represents the expected return of a security relative to its systematic risk, typically depicted in the Capital Asset Pricing Model (CAPM).
- **Standard Deviation and Width of the Normal Distribution**: While important for understanding variability, it does not directly plot risk versus expected return in this context.
- **Covariance Graph**: Involves the relationship between different securities' returns, but doesn't specifically depict systematic risk versus expected return.
- **Capital Asset Pricing Model**: A model that describes the relationship between systematic risk and expected return, but the term usually refers to the theoretical framework rather than a specific graph.
In this scenario, the correct term that specifically refers to the graph illustrating the positive relationship between systematic risk and expected return is the **Security Market Line**.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education