The level of systematic risk inherent in an asset is measured by
A) The reward-to-risk ratio
B) Alpha
C) Beta
D) The market risk premium
E) Covariance

Question

Quizplus · Accepted Answer

The level of systematic risk inherent in an asset is measured by beta. Beta measures the sensitivity of a stock's returns to the market's movements. A beta of 1 implies that the stock's returns have been perfectly correlated with the market's returns, whereas a beta of less than 1 means that the stock's returns have been less volatile than the market's returns, and a beta of more than 1 indicates that the stock's returns have been more volatile than the market's returns.

The Level of Systematic Risk Inherent in an Asset Is