IBM Has a Beta of 1

question 106

Multiple Choice

IBM has a beta of 1.0 and Apple Computer has a beta of 3.0.Which of the following statements must be correct?

• A)The market risk premium for Apple must be larger than the market risk premium of IBM.
• B)If investors become more risk averse, the expected return of Apple will increase more than the expected return on IBM.
• C)Apple's expected rate of return must be three times as large as IBM's.
• D)None of these statements is correct.

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Definitions:

Measurement

The process or the result of determining the size, length, or amount of something, usually according to a set of standard units.

Nominal Scale

A classification system where numerical or non-numerical data are categorized without a natural order or ranking.

Measurement

The process of quantifying the characteristics of phenomena observed, usually by assigning numbers in a valid and reliable way.

Gender

The range of characteristics differentiating and categorizing males and females, and can reflect one's personal sense of identity based on societal norms.