Company A's historical returns for the past three years are: 6%,15%,and 15%.Similarly,the market portfolio's returns were: 10%,10%,and 16%.Calculate the beta for Stock
A)1.75
B)1.0
C)0.57
D)0.75

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 covariance is 0.015 and the variance of the market is 0.02, resulting in a beta of 0.75.

Company A's Historical Returns for the Past Three Years Are