If a stock consistently goes down (up)by 1.6% when the market portfolio goes down (up)by 1.2%,then its beta:
A) equals 1.04.
B) equals 1.24.
C) equals 1.33.
D) equals 1.40.

Question

Quizplus · Accepted Answer

Beta is calculated as the covariance of the stock's returns with the market returns divided by the variance of the market returns. Here, the stock's return changes by 1.6% when the market changes by 1.2%, so beta = 1.6% / 1.2% = 1.33.

If a Stock Consistently Goes Down (Up)by 1