The Beta of a Risk-Free Security Is _____ and the Beta

question 36

Multiple Choice

The beta of a risk-free security is _____ and the beta of the overall market is:

• A)1;0
• B)infinite;1
• C)1;1
• D)0;0
• E)0;1

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Definitions:

Economic Profit

The surplus remaining after deducting total costs from total revenues, including both explicit and implicit costs, and representing a measure of economic efficiency.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Accounting Profit

The total revenue of a business minus the explicit costs, representing the financial gain on its income statement.

Economic Cost

The total cost of choosing one action over another, including both the costs incurred and the opportunity costs of forgone alternatives.