ABC shares have a beta of 0.73. The market as a whole is expected to decline by 20% thereby causing ABC shares to
A) decline by 20.7%.
B) increase by 20.7%.
C) increase by 14.6%.
D) decline by 14.6%.

Question

Quizplus · Accepted Answer

Beta measures a stock's volatility relative to the market. A beta of 0.73 means ABC shares are expected to decline by 73% of the market's decline. Therefore, if the market declines by 20%, ABC shares are expected to decline by 0.73 * 20% = 14.6%.

ABC Shares Have a Beta of 0