Which of the following statements is true?
A)A stock with a beta of zero has a very low level of systematic risk.
B)A stock with a beta greater than 1.0 has lower nondiversifiable risk than a stock with a beta of 1.0.
C)A stock with a beta less than 1.0 has lower nondiversifiable risk than a stock with a beta of 1.0.
D)A stock with a beta less than 1.0 has higher nondiversifiable risk than a stock with a beta of 1.0.

Question

Quizplus · Accepted Answer

Beta measures the volatility of a stock’s returns compared to the market as a whole. A beta less than 1 means the stock is less volatile than the market, and therefore has lower nondiversifiable risk. A beta greater than 1 means the stock is more volatile than the market, and therefore has higher nondiversifiable risk. A beta of zero means the stock has no systematic risk, but it may still have diversifiable risk.

Which of the Following Statements Is True