Assume the Single-Factor Model Is Applied to a Security That

question 12

Multiple Choice

Assume the single-factor model is applied to a security that has a negative factor beta.The security will:

• A)always have a positive rate of return.
• B)have an expected return greater than the risk-free rate.
• C)have an actual return that equals the risk-free rate.
• D)have an expected return equal to the market rate of return.
• E)have an actual rate of return that can be positive,negative,or zero.

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Definitions:

Sample Variance

A measure of the variability or spread of a sample data set, calculated as the average of the squared differences from the sample mean.

Sample Mean

The mean of a collection of numbers, determined by adding all the values together and then dividing the total by the count of values in the set.

Median

The middle value in a dataset when arranged in ascending or descending order, effectively dividing the dataset into two equal halves.

Central Tendency

A statistical measure that identifies a single value as representative of an entire distribution of data, typically the mean, median, or mode.