What Does the "Beta" of an Asset Measure

question 29

Multiple Choice

What does the "beta" of an asset measure?

• A) how the nondiversifiable risk compares with diversifiable risk for an asset
• B) how the expected return compares with the diversifiable risk of a given asset
• C) how the expected return compares with the nondiversifiable risk of the market portfolio
• D) how the nondiversifiable risk of a given asset compares with that of the market portfolio

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Definitions:

Monthly Interest Rate

It's the interest rate applied each month on loans, savings, or investments, calculated by dividing the annual interest rate by 12.

Probability Of Default

The likelihood that a borrower will be unable to meet its debt obligations.

EOQ

Economic Order Quantity, a formula used to determine the ideal quantity of inventory to minimize total costs related to ordering, receiving, and holding inventory.