If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0, then the:
A) stock is currently underpriced.
B) market risk premium is increasing.
C) stock has a significant amount of unique risk.
D)stock has a beta exceeding 1.0.

Question

Quizplus · Accepted Answer

A slope greater than 1.0 indicates that the stock's returns are more sensitive to market returns, which means that the stock has a beta exceeding 1.0. This implies that the stock is riskier than the market, as it has a significant amount of unique risk. Therefore, the correct choice is D. The other choices are not necessarily true based on the information provided.

If the Line Measuring a Stock's Historic Returns Against the Market's