A security that has a rate of return that exceeds the Treasury bill rate but is less than the market rate of return must:
A) Be a risk-free asset.
B) Have a beta that is greater than 1.0 but less than 2.0.
C) Be a risk-free asset with a beta less than.99.
D) Be a risky asset with a standard deviation less than 1.0.
E) Be a risky asset with a beta less than 1.0.

Question

Quizplus · Accepted Answer

A security with a rate of return that exceeds the Treasury bill rate but is less than the market rate of return is considered a risky asset because it has a positive return over the risk-free rate. However, its return is less than the market return, indicating it has less systematic risk than the market. This is characterized by a beta (β) less than 1.0, as beta measures a security's sensitivity to market movements. A beta less than 1.0 suggests the security is less volatile than the market.

A Security That Has a Rate of Return That Exceeds