A stock with a beta of zero would be expected to:
A) have a rate of return equal to the risk-free rate.
B) have a rate of return equal to the market rate.
C) have a rate of return equal to zero.
D) have a rate of return equal to the one.

Question

Quizplus · Accepted Answer

A stock with a beta of zero is expected to be completely uncorrelated with the market, meaning its returns are not affected by market movements. Therefore, its expected rate of return would be the risk-free rate, as it does not carry the market risk that would warrant a higher expected return.

A Stock with a Beta of Zero Would Be Expected