A project returns 18% when the market returns 15% and 8% when the market returns 10%. Calculate the project's market beta.

Question

Quizplus · Accepted Answer

The beta of a project is calculated as the covariance of the project's returns with the market returns divided by the variance of the market returns. Here, the change in the project's return (18% - 8% = 10%) divided by the change in the market return (15% - 10% = 5%) gives a beta of 2.0.

A Project Returns 18% When the Market Returns 15% and 8