What Is the Beta of a Risk-Free Security

question 5

Multiple Choice

What is the beta of a risk-free security?

• A).00
• B).50
• C)1.00
• D)1.50
• E)2.00

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Definitions:

Deposit Insurance

Deposit Insurance is a protection scheme for bank depositors that guarantees the safety of deposits in member banks, up to a certain limit, in the event of a bank failure.

Moral Hazard

A situation in which one party is more likely to take risks because they do not have to bear the full consequences of their actions, often seen in insurance and finance.

Risk Aversion

A preference for lower risk investments, often reflecting an investor's reluctance to accept a high likelihood of losses.

Federal Tax Bracket

Federal tax brackets are ranges of income to which different tax rates apply, forming part of the U.S. progressive tax system.