According to the CAPM, the lower a security's beta, the ______ its exposure to systematic risk...

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Question

According to the CAPM, the lower a security's beta, the ______ its exposure to systematic risk...

According to the CAPM, the lower a security's beta, the ______ its exposure to systematic risk and the ____ its expected return.

1. greater; higher

2. greater greater

3. lower; lower

4. greater; lower

5. lower; higher

business finance

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Answer 1

Answer #1

Answer is Option 3

According to CAPM,

Expected return on stock = Risk free rate + Beta * Market RIsk premium

This implies Beta and expected return on stock are positively correlated. So, higher is the beta, higher would be the expected return and vice-versa

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Answer 2

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