Accredited Wealth Management Advisor (AWMA) Exam 3 Practice Test

Investors seeking the least risk should acquire stocks with beta coefficients

less than 1.0. less than 0.5. greater than 1.5. greater than 1.0.

Correct Answer:

less than 1.0.

Explanation:

Beta measures a stock’s sensitivity to overall market movements, i.e., its systematic risk. A beta of 1 means the stock tends to move with the market; a beta below 1 indicates the stock is less volatile than the market, so it carries less market risk. To seek the least risk relative to the market, you want a beta under 1.0, which describes stocks that are less reactive to market swings. A beta above 1 signals greater volatility and higher risk, so those are not the best for minimizing risk. Keep in mind that even low-beta stocks still have unsystematic risk, which diversification can reduce.

Access more questions from this quiz

Continue to Accredited Wealth Management Advisor (AWMA) Exam 3 Practice Test for more practice questions and the full quiz experience.

Access More Questions