Suppose the risk-free return is 2.5% and the market portfolio has an expected return of 6.2% and a volatility (measured as standard deviation) of 14%. A stock has a 20% volatility and a correlation with the market of 0.6. Calculate and explain the beta of the stock with respect to the market.

Suppose the risk-free return is 2.5% and the market portfolio has an expected return of 6.2% and a volatility (measured as standard deviation) of 14%. A stock has a 20% volatility and a correlation with the market of 0.6. Calculate and explain the beta of the stock with respect to the market.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 3P: Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required...

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Question

Suppose the risk-free return is 2.5% and the market portfolio has an expected return
of 6.2% and a volatility (measured as standard deviation) of 14%. A stock has a 20%
volatility and a correlation with the market of 0.6. Calculate and explain the beta of
the stock with respect to the market.

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