Which one of the following statements is correct?
A) A beta of 1.2 indicates that a security has less risk than the overall market.
B) Treasury bills have a beta of zero.
C) A stock with a beta of 1.4 has less systematic risk than a stock with a beta of.9.
D) The risk premium associated with a stock will decrease as the beta of the stock increases.
E) The beta of a diversified portfolio will approach zero as the number of stocks in the portfolio is increased.

Question

Quizplus · Accepted Answer

Treasury bills are considered risk-free assets in the context of the Capital Asset Pricing Model (CAPM), which means they have no systematic risk compared to the market. Therefore, their beta, which measures the sensitivity of a security's returns to the market returns, is zero.

Which One of the Following Statements Is Correct