Two Investments, X and Y, Have Beta Values of 0

question 244

Multiple Choice

Two investments, X and Y, have beta values of 0.1 and 3.0 respectively. Based on this, we can claim that, relative to the market portfolio,

• A) both have more nondiversifiable risk than the market portfolio.
• B) both have less nondiversifiable risk than the market portfolio.
• C) X has more nondiversifiable risk and Y has less nondiversifiable risk than the market portfolio.
• D) X has less nondiversifiable risk and Y has more nondiversifiable risk than the market portfolio.

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Definitions:

Fixed Costs

Expenses that do not change with changes in the level of production or sales, such as rent, salaries, and insurance premiums.

Marginal Cost

The expense incurred from manufacturing an extra unit of a product or service.

Average Cost

The total cost of production divided by the number of goods or services produced, often used to determine profitability.

Maximize Profit

The process or strategy by which a business attempts to achieve the highest possible profit from its operations, often by increasing revenue, reducing costs, or both.