Q816
In capital asset pricing model, an amount of risk that stock contributes to portfolio of market is classified as
A.
stand-alone coefficient
B.
relevant coefficient
C.
alpha coefficient
D.
beta coefficient
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
In capital asset pricing model, an amount of risk that stock contributes to portfolio of market is classified as beta coefficient. Beta coefficient is a measure of sensitivity of a company's stock price to movement in the broad market index. It is an indicator of a stock's systematic risk which is the undiversifiable risk inherent in the whole financial system. Beta coefficient is an important input in the capital asset pricing model (CAPM)