Question

In Capital Asset pricing model, beta measures the

A systematic risk Correct Answer Incorrect Answer
B unsystematic risk Correct Answer Incorrect Answer
C total risk Correct Answer Incorrect Answer
D business risk Correct Answer Incorrect Answer
E financial risk Correct Answer Incorrect Answer

Solution

Systematic risk is the risk related to the entire economy and not specific to any company or sector. It is no diversifiable risk and is measured by the beta. Beta measures the volatility of a security with respect to the market and is therefore reflective of the systematic risk.

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