Two investments, X and Y, have beta values of 0.1 and 3.0 respectively.Based on this, we can claim that, relative to the market portfolio,
A)both have more nondiversifiable risk than the market portfolio.
B)both have less nondiversifiable risk than the market portfolio.
C)X has more nondiversifiable risk and Y has less nondiversifiable risk than the market portfolio.
D)X has less nondiversifiable risk and Y has more nondiversifiable risk than the market portfolio.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of an investment's returns relative to the market. A beta of 1 indicates the same risk as the market. A beta less than 1, like X's 0.1, indicates less nondiversifiable risk, while a beta greater than 1, like Y's 3.0, indicates more nondiversifiable risk.

Two Investments, X and Y, Have Beta Values of 0