An Investment with a Beta of 4

question 174

Multiple Choice

An investment with a beta of 4.0 means that the investment has four times the

• A)average expected rate of return of the market portfolio.
• B)risk of all similar investments.
• C)level of nondiversifiable risk as the market portfolio.
• D)level of diversifiable risk as the market portfolio.

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Definitions:

Initial Outlays

The initial investments or costs incurred when starting a project, business, or investment.

Net Present Value

A financial measure that assesses an investment's profitability by calculating the difference between the present value of cash inflows and the present value of cash outflows throughout a certain timeframe.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost of Capital

The rate of return a company must pay investors to finance its assets, often used as a benchmark to evaluate the profitability of investments.