SIE Exam Question 944: Answer and Explanation

Question: 944

Which of the following is/are correct regarding beta?

(1) It is used to measure the amount of unsystematic risk in an investor's portfolio.

(2) A portfolio's beta can be positive or equal to zero, but cannot be negative.

• A. (1) only
• B. (2) only
• C. Both (1) and (2) are correct.
• D. Neither (1) or (2) are correct.

Correct Answer: D

Explanation:

Beta is used to measure the amount of systematic risk in an investor's portfolio. A portfolio's beta can be positive, negative, or equal to zero.