Which of the following statements is true about the beta of a portfolio?
A) If the beta of a portfolio doubles, its required return also doubles.
B) If a stock has a negative beta, its required return is negative.
C) Higher beta stocks have more company-specific risk, but do not necessarily have more market risk.
D) If a portfolio's beta increases from 1.2 to 1.5, its required rate of return will increase by an amount equal to its market risk premium.
E) If the beta of a stock is three, the stock's relevant risk is thrice as volatile as the market portfolio.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of a stock's returns to market returns. A beta of three means the stock is three times as volatile as the market.

Which of the Following Statements Is True About the Beta