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 included in the portfolio has a negative beta, the portfolio's required return is negative.
C)Portfolios that contain 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 actual rate of return will decrease by 1.5 times the market risk premium.
E)If the beta of a stock is three, the stock's relevant risk is three times as volatile as the market portfolio.

Question

Quizplus · Accepted Answer

Beta measures a stock's volatility in relation to the market. A beta of three means the stock is three times as volatile as the market, not necessarily its risk in terms of the amount of loss or gain.

Which of the Following Statements Is True About the Beta