A Security Held in a Large,well-Diversified Portfolio That Has a Beta

question 19

Multiple Choice

A security held in a large,well-diversified portfolio that has a beta of zero in a one-factor model will have an actual return:

• A)of zero.
• B)closely equal to the market risk premium.
• C)closely equal to the expected return.
• D)that is positive and less than the risk-free rate.
• E)that is less than the risk-free rate and can be negative.

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Definitions:

Chain-style Business

A business model where multiple outlets of the same company offer the same product or service, typically under the same brand.

Franchisor

A business entity that grants the right to an individual or group to carry out commercial activities using its trademark and business model in exchange for a fee or royalty.

Franchisee

The seller of goods or services under a trade name or trademark in a franchise.

Trade Name

The name by which a business is known to the public, differing from its legal name, under which it carries out its business activities.