1 The Beta of an investment in Treasury bills is A 00 B 05 C

1. The Beta of an investment in Treasury bills is:

A. 0.0

B. 0.5

C. 1.0

D. meaningless; only common stocks have Betas.

Solution

A. 0.0
Beta can be zero. Some zero-beta assets are risk-free, such as treasury bonds and cash. However, simply because a beta is zero does not mean that it is risk-free. A beta can be zero simply because the correlation between that item\'s returns and the market\'s returns is zero.

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