The stock of NOP, Inc. has a beta of 1.80. The market rate of return is expected to increase by by 3%. Beta predicts that ABC stock should
A) increase in value by 2.4%.
B) increase in value by 5.4%.
C) decrease in value by .8%.
D) increase in value by 1.8%.

Question

Quizplus · Accepted Answer

The beta of a stock measures its volatility in relation to the market. A beta of 1.80 means the stock is expected to move 180% of the market's move. Therefore, if the market is expected to increase by 3%, the stock should increase by 1.80 * 3% = 5.4%.

The Stock of NOP, Inc