In the pricing of a financial asset
A) The greater the asset's beta (?), the smaller will be compensation for risk
B) The smaller the asset's beta (?), the smaller will be compensation for risk
C) Compensation for risk will be at a maximum when the asset's beta (?) is equal to zero
D) There is no relationship between an asset's beta (?) and compensation for risk

Question

Quizplus · Accepted Answer

The asset's beta measures its volatility relative to the market. A smaller beta indicates less volatility and thus, typically, less compensation for risk is required by investors.

In the Pricing of a Financial Asset