A portfolio with a level of systematic risk that is the same as that of the market has a beta that is
A) equal to zero.
B) equal to one.
C) less than the beta of the risk-free asset.
D) less than zero.

Question

Quizplus · Accepted Answer

A portfolio with the same level of systematic risk as the market has a beta of 1, by definition. Beta measures the relationship between the returns of the portfolio and the market. Therefore, option B is the correct answer. Options A, C, and D are incorrect because a beta of zero would indicate no systematic risk, a beta lower than the risk-free asset is not possible, and a negative beta would suggest an inverse relationship with the market.

A Portfolio with a Level of Systematic Risk That Is