Asked by Lavkush Tamrakar on Jun 26, 2024
Verified
The slope of the characteristic line for a specific security is an estimate of ____ for that security.
A) beta
B) systematic risk
C) total risk
D) a and b
Characteristic Line
A line used in finance to illustrate the rate of return of an asset as a function of the return of the market as a whole.
Systematic Risk
The risk inherent to the entire market or market segment, not diversifiable through portfolio diversification.
Total Risk
The overall risk associated with an investment, encompassing both systematic and unsystematic risks.
- Comprehend the principle of beta and its function in assessing market risk.
- Analyze beta values to determine the extent of systematic risk present in a security.
Verified Answer
DB
Diana BenitezJun 28, 2024
Final Answer :
D
Explanation :
The slope of the characteristic line for a specific security is an estimate of its beta, which in turn measures the security's systematic risk. Therefore, both A and B are correct.
Learning Objectives
- Comprehend the principle of beta and its function in assessing market risk.
- Analyze beta values to determine the extent of systematic risk present in a security.