Which of the following will affect the beta value of an individual security? I.

Question

Which of the following will affect the beta value of an individual security? I. interval of time frequency used for the data sample II. length of the time period used for the data sample III. particular time period selected for the sampling IV. choice of index used as the measure of the market 1. A. I and II only B. I and III only C. II and IV only D. II, III, and IV only E. I, II, III, and IV has the greatest level of total risk and Stock has the highest risk premium. Of the following, Stock Stock Beta Standard deviation 2. 1.09 .96 1.24 1.13 87 11% 13% 18% 26% 9% C D A. A; B B. B; E C. C; D D. D; C E. C; E The slope of the security market line is equal to the: A. market risk premium. B. risk-free rate of return. C. market rate of return. D. market rate of return multiplied by any security's beta, given an inefficient market. E. market rate of return multiplied by the risk-free rate. 3·

Explanation / Answer

1. Option E- All of the options given affect the beta value of an individual security.

2. Option D- stock with highest standard deviaition has the greatest level of total risk and stock with highest beta has highest risk premium.

3. option A- SML is equal to market risk premium.

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