객관식
Energy distribution provides utilities, which are best described as:
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0. Basic Principles of Economics
Introduction to Economics
객관식
In the context of the Capital Asset Pricing Model (CAPM), what is the expected return on a security with a beta of 1?
A
It equals the expected return of the market portfolio.
B
It is higher than the expected return of the market portfolio.
C
It is independent of the market return.
D
It is lower than the risk-free rate.
검증된 단계별 안내1
Recall the Capital Asset Pricing Model (CAPM) formula for the expected return on a security:
\[\text{E}(R_i) = R_f + \beta_i \times (\text{E}(R_m) - R_f)\]
where \(\text{E}(R_i)\) is the expected return on security \(i\), \(R_f\) is the risk-free rate, \(\beta_i\) is the beta of the security, and \(\text{E}(R_m)\) is the expected return of the market portfolio.
Understand the meaning of beta (\(\beta\)): it measures the sensitivity of the security's returns to the returns of the market portfolio. A beta of 1 means the security moves exactly in line with the market.
Substitute \(\beta = 1\) into the CAPM formula:
\[\text{E}(R_i) = R_f + 1 \times (\text{E}(R_m) - R_f)\]
Simplify the expression:
\[\text{E}(R_i) = R_f + \text{E}(R_m) - R_f = \text{E}(R_m)\]
This shows that the expected return on a security with beta 1 equals the expected return of the market portfolio.
Interpret the result conceptually: since the security has the same systematic risk as the market, its expected return compensates exactly for that risk, matching the market's expected return.
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