A stock with a beta of zero would be expected to have a rate of return equal to:
A)the risk-free rate.
B)the market rate.
C)the prime rate.
D)the average AAA bond.
E)None of the above.

Question

Quizplus · Accepted Answer

A stock with a beta of zero means that it has no correlation with the overall market. Therefore, its rate of return would not be influenced by market movements and would be equal to the risk-free rate, which is generally the rate of return on government bonds.

A Stock with a Beta of Zero Would Be Expected