Styles QUESTION 43 1 For the next 3 questions suppose the following holds The ma
ID: 1176093 • Letter: S
Question
Styles QUESTION 43 1 For the next 3 questions suppose the following holds The market portfolio has an expected return of 5% and a standard deviation of 20 % The standard deviation of ABC Company's stock 40% and its correlation coefficient with the market portfolio is 6 2. What is the beta of ABC's stock? 0.75 ? 0.95 ? 0.95 1.05 1.20 QUESTION 44 what would happen to the beta if ABC's standard deviation is 50%? i 115 C 1.25 C 135 C 1.45 1.50 I peints QUESTION 45 1. What would happen to the beta if the correlation is .87 Assume ABC's standard deviation is 40%. C 1.1 ? 1.25 ? 1.40 ? 1.60 1.75Explanation / Answer
1.
Correct option is > 1.20
Beta of ABC = Correlation x Standard deviation of ABC / Standard deviation of Market
Beta of ABC = 0.6 x 0.4 / 0.2
Beta of ABC = 1.20
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2.
Correct option is > 1.50
Beta of ABC = Correlation x Standard deviation of ABC / Standard deviation of Market
Beta of ABC = 0.6 x 0.5 / 0.2
Beta of ABC = 1.50
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3.
Correct option is > 1.60
Beta of ABC = Correlation x Standard deviation of ABC / Standard deviation of Market
Beta of ABC = 0.8 x 0.4 / 0.2
Beta of ABC = 1.60