One Asset Has a Beta of 1

question 62

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.

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Definitions:

Credit Application

A form or process by which an individual or company seeks to obtain credit from a lending institution or creditor.

Interest Rate

the percentage charged on a loan or paid on deposits over a specific period of time, reflecting the cost of borrowing or the reward for saving.

Adjustable-Rate Mortgage

A type of home loan in which the interest rate can change over time, based on a benchmark or index.

Fixed-Rate Mortgage

A home loan with an interest rate that remains the same for the entire term of the loan, providing predictable monthly payments.