An Equity Security with Systematic Risk Equal to the Average

question 43

Multiple Choice

An equity security with systematic risk equal to the average amount of systematic risk of all equity securities in the market:

• A) has a market beta equal to one.
• B) should expect to earn the same rate of return as the average stock in the market portfolio.
• C) gives no insight into the risk premium of stock.
• D) Both a and b are correct.

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Definitions:

False Dilemma

A logical fallacy that presents two options as the only possible choices when in fact more options exist.

SWAT Team

A specialised unit within law enforcement agencies trained to handle high-risk operations that fall outside the abilities of regular officers.

Hostages

Individuals held captive or prisoner by others, typically to compel another party to meet certain demands.

Superstition

Beliefs or practices that are rooted in magical thinking and unscientific correlations between actions and events.