1) If the beta of the market index is 1.0 and the standard deviation of the market index increases from 12% to 18%, what is the beta of the market index following this increase?
A. 0.8
B. 1.0
C. 1.2
D. 1.5
2) The security market line represents __________
A. the risk-return for all portfolios which can be constructed from the risk-free investment and the optimal risky portfolio
B. the relationship between beta and expected return
C. the relationship between an investment’s return and the return on an index
D. the relationship between an investment's return and the return on a negative beta portfolio
1) Beta of Market remains same irrespective of the standard
deviation of the market.
Hence Option b Beta = 1.0
2) Option b relation between beta and expected return, Expected
Return is on y axis and beta is on x axis is SML line
1) If the beta of the market index is 1.0 and the standard deviation of the...
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