Assume the beta for the stock market in general is 1.0 and the beta for World-Wide Television Productions is 2.8.If the stock market increases in value by 5 percent,what is the expected increase in value for the World-Wide Productions stock?
A)1 percent
B)5 percent
C)14 percent
D)28 percent
E)30 percent

Question

Quizplus · Accepted Answer

The expected increase in value for World-Wide Productions stock is calculated using its beta of 2.8. Since beta represents how much the stock is expected to change relative to the market, a 5 percent increase in the market would lead to a 2.8 * 5% = 14% expected increase in the value of World-Wide Productions stock.

Assume the Beta for the Stock Market in General Is