Beta of a portfolio consisting entirely of U.S. Treasury securities is which of the following?

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Multiple Choice

Beta of a portfolio consisting entirely of U.S. Treasury securities is which of the following?

Beta measures how much a portfolio moves with the overall market. A portfolio made entirely of U.S. Treasury securities is viewed as risk-free with respect to market movements, so it has no systematic market risk. In CAPM terms, the covariance with the market is zero, and beta equals that covariance divided by the market variance, which yields zero. So the correct result is zero beta. The other options would imply some degree of market-related movement, which Treasury-only holdings do not exhibit.

Beta measures how much a portfolio moves with the overall market. A portfolio made entirely of U.S. Treasury securities is viewed as risk-free with respect to market movements, so it has no systematic market risk. In CAPM terms, the covariance with the market is zero, and beta equals that covariance divided by the market variance, which yields zero. So the correct result is zero beta. The other options would imply some degree of market-related movement, which Treasury-only holdings do not exhibit.

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