The Beta of ABC Co

question 77

Multiple Choice

The beta of ABC Co.stock is the slope of:

• A)the security market line.
• B)the characteristic line for a plot of returns on the S&P 500 versus returns on short-term Treasury bills.
• C)the arbitrage pricing line.
• D)the characteristic line for a plot of ABC Co.returns against the returns of the market portfolio for the same period.

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Definitions:

Risk Neutral

An attitude or preference indicating indifference between choices with uncertain outcomes, focusing instead on the expected values.

Risk Averse

A characteristic of preferring to avoid risk, inclining towards guaranteed outcomes over potentially higher-yielding but uncertain ones.

Income

The accumulation of funds, characteristically on a habitual basis, through work or investing.

Von Neumann-Morgenstern

A theory of expected utility that describes how rational individuals choose among uncertain prospects, emphasizing the maximization of utility for decision-making under uncertainty.