The betas for the market portfolio and risk-free security are: $\begin{array}{lcc}
&\text { Market } & \text { Risk-free } \
\hline \text { I. } & 0 & 1 \
\text { II. } & 1 & 0 \
\text { III. } & -1 & 1 \
\text { IV. } & 1 & -1 \
\text { V } & 2 & 1
\end{array}$
A) I
B) II
C) III
D) IV
E) V

Question

Quizplus · Accepted Answer

The beta of the market portfolio is always 1 because it represents the benchmark against which other securities are measured. The beta of a risk-free security is 0 because it has no risk and therefore no covariance with the market, meaning it does not move with the market.

The Betas for the Market Portfolio and Risk-Free Security Are