Use the following three statements to answer this question:
A) I, II and III are correct.
B) I, II and III are incorrect.
C) I is correct, II and III are incorrect.
D) I, II are incorrect, III is correct.
I.A security with a beta of zero implies that all of the variability in this security's return is diversifiable by any investor holding a well-diversified portfolio.
II.A security with a beta of 1 implies that if the market increased (or decreased)by 1 percent,the return on the security would increase (decrease)by more than 1 percent on average.
III.A security that has a beta cannot be priced.

Question

Quizplus · Accepted Answer

Statement I is correct stating that a security with a beta of zero implies that all of the variability in this security's return is diversifiable by any investor holding a well-diversified portfolio. 
Statement II is incorrect as it states that if the market increased (or decreased)by 1 percent, the return on the security would increase (decrease)by more than 1 percent on average. However, the correct statement should be that if the market increased (or decreased) by 1 percent, the return on the security would increase (decrease) by 1 percent on average. 
Statement III is also incorrect as it states that a security that has a beta cannot be priced, which is not true.

Use the Following Three Statements to Answer This Question