One Asset Has a Beta of 1

question 69

Multiple Choice

One asset has a beta of 1.5 and another asset has a beta of 0.75.The difference in beta means that the asset with a beta of 0.75 has

• A)75 percent less nondiversifiable risk than the asset with a beta of 1.5.
• B)75 percent more nondiversifiable risk than the asset with a beta of 1.5.
• C)twice as much nondiversifiable risk as the asset with a beta of 1.5.
• D)one-half as much nondiversifiable risk as the asset with a beta of 1.5.

---

Definitions:

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis, reflecting the time value of money.

Initial Investment

The amount of money used to start a project, purchase an asset, or invest in a business venture.

Marginal Cost

The cost incurred by producing one additional unit of a product or service.

Fixed Costs

Fixed costs refer to expenses that do not change with the level of production or output over the short term, such as rent, salaries, and insurance premiums.