International Geographica is adding a new magazine project to the company portfolio and has the following information: the expected market return is 12%, the risk-free rate is 4%, and the expected return on the new project is 20%. What is the beta of the project?
A) 1.00
B) 1.50
C) 1.75
D) 2.00

Question

Quizplus · Accepted Answer

The beta can be calculated using the formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Solving for Beta gives: 20% = 4% + Beta * (12% - 4%), which results in Beta = 2.00.

International Geographica Is Adding a New Magazine Project to the Company