If a stock return is expected to be the same as the expected return on the market, the stock's CAPM beta is ____.
A)0.0
B)0.5
C)1.0
D)undefined

Question

Quizplus · Accepted Answer

A stock's CAPM beta measures its systematic or market risk. If the stock's expected return is the same as the expected return on the market, then its systematic risk is the same as the market, which has a beta of 1. Therefore, the stock's CAPM beta should also be 1.

If a Stock Return Is Expected to Be the Same