A Particular Asset Has a Beta of 1

question 21

Multiple Choice

A particular asset has a beta of 1.2 and an expected return of 10%.The expected return on the market portfolio is 13% and the risk-free is 5%.Which of the following statement is correct?

• A) This asset lies on the security market line.
• B) This asset lies above the security market line.
• C) This asset lies below the security market line.
• D) Cannot tell from the given information.

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Definitions:

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A volatile, flammable liquid derived from petroleum, used primarily as fuel in internal combustion engines.

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A traditional Japanese dish consisting of vinegared rice, usually accompanied by various ingredients like seafood, vegetables, and occasionally tropical fruits.

Income Elasticity

A measure of how much the demand for a product changes in response to a change in consumers' income.

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The overall volume of a commodity or service that individuals are prepared and financially able to buy at a certain price.