For each additional 1% change in market return,the return on a stock having a beta of 2.2 changes,on average,by:
A)1.00%.
B)0.55%.
C)2.20%.
D)1.10%.

Question

Quizplus · Accepted Answer

The beta of 2.2 indicates that the stock is more volatile than the market and will move 2.2 times in the same direction as the market. Therefore, for each 1% change in the market return, the return on the stock will change by an average of 2.2%. The answer choice C is the only option that matches this calculation.

For Each Additional 1% Change in Market Return,the Return on a Stock