Currently XYZ Company has a required return of 12% and a beta of 1.2. According to the CAPM, XYZ:
A) Can't be compared since the risk-free rate is not known.
B) Is less risky than the market.
C) Has an equal risk to the market.
D) Is riskier than the market.

Question

Quizplus · Accepted Answer

Beta is a measure of a stock's volatility in relation to the market. A beta of 1.2 indicates that XYZ Company is 20% more volatile than the market, thus riskier.

Currently XYZ Company Has a Required Return of 12% and a Beta