Question

One index of systematic risk is a stock's beta coefficient.

a. True
b. False

Answer 1

Solution :

True. One index of systematic risk is a stock's beta coefficient.

Beta co-efficient measures systematic risk, that is risk which affects the market as a whole and hence cannot be eliminated through diversification.

Beta coefficient of a stock measures the sensitivity of the stock with reference to a broad base market Index

It is the expected movement in the return of a security per unit of movement in the return of the market.

Thus the solution is Option a. True