Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: rA = 11.3%; rRF = 5%; rM = 10%
A) 0.86
B) 1.26
C) 1.10
D) 0.80
E) 1.35

Question

Quizplus · Accepted Answer

The correct beta coefficient for Stock A is 1.26. This is because the beta coefficient is calculated as the covariance of the stock's return with the market return divided by the variance of the market return. In this case, the covariance of Stock A's return with the market return is 0.063, and the variance of the market return is 0.05. Therefore, the beta coefficient for Stock A is 1.26.

Given the Following Information, Determine Which Beta Coefficient for Stock