GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Zero
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- 1
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0.5
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1
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Detailed explanation-1: -What Is a Zero-Beta Portfolio? A zero-beta portfolio is a portfolio constructed to have zero systematic risk, or in other words, a beta of zero. A zero-beta portfolio would have the same expected return as the risk-free rate.
Detailed explanation-2: -Beta Value Equal to 1.0 However, the beta calculation can’t detect any unsystematic risk. Adding a stock to a portfolio with a beta of 1.0 doesn’t add any risk to the portfolio, but it also doesn’t increase the likelihood that the portfolio will provide an excess return.
Detailed explanation-3: -Answer: The risk-free security has a beta equal to zero while the market portfolio’s beta is equal to one.
Detailed explanation-4: -What does it mean if i is equal to zero? It means that actual return = expected return + i. It means the ith stock’s returns are not affected by the factor, F. If i is negative: positive changes in the factor will decrease the ith stock’s returns.