For each 1% change in the market portfolio's excess return,the investment's excess return is expected to change by ________ percent due to risks that it has in common with the market.
A)beta
B)alpha
C)zero
D)more than 1
E)less than 1

Question

Quizplus · Accepted Answer

This is the definition of beta, which measures the sensitivity of an investment's returns to changes in the market's returns. A beta of 1 means that the investment's returns move in line with the market, while a beta greater than 1 means the investment's returns are more sensitive to changes in the market, and a beta less than 1 means the investment's returns are less sensitive to changes in the market. Therefore, for each 1% change in the market portfolio's excess return, the investment's excess return is expected to change by beta percent due to risks that it has in common with the market.

For Each 1% Change in the Market Portfolio's Excess Return,the