Which of the following statements is true?
A)A share with a beta less than zero has no exposure to systematic risk.
B)A share with a beta greater than 1.0 has lower nondiversifiable risk than a share with a beta of 1.0.
C)A share with a beta less than 1.0 has lower nondiversifiable risk than a share with a beta of 1.0.
D)A share with a beta less than 1.0 has higher nondiversifiable risk than a share with a beta of 1.0.

Question

Quizplus · Accepted Answer

A share with a beta less than 1.0 has lower nondiversifiable risk than a share with a beta of 1.0. Beta measures the volatility of a stock in relation to the overall market. A beta of less than 1.0 indicates that the stock is less volatile than the market, and therefore has lower nondiversifiable risk. A beta of greater than 1.0 indicates that the stock is more volatile than the market, and therefore has higher nondiversifiable risk. A beta of zero would indicate that the stock has no exposure to systematic risk.

Which of the Following Statements Is True