Answer (C) is correct . The effect of an individual security on the volatility of a portfolio is measured by its sensitivity to movements by the overall market. This sensitivity is stated in terms of a stock’s beta coefficient. If the beta coefficient is 1.0, then the price of that stock tends to move in the same direction and to the same degree as the overall market.
Answer (A) is incorrect because The risk-free rate is the rate returned by very safe and nonvolatile securities, such as U.S.?government Treasury bills.
Answer (B) is incorrect because A beta value of 1.0 only means the price of the stock moves in concert with that of the overall market; if the market is not stable, the stock price will not be either.
Answer (D) is incorrect because A beta value of 1.0 only means the price of the stock moves in concert with that of the overall market; if the market is volatile, the stock price will be also.
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