If the market rate of return is 10 percent and the beta on a particular stock is .78,the return on the stock will be

Question

Quizplus · Accepted Answer

The beta of a stock measures its volatility relative to the market. A beta of less than 1 indicates that the stock is less volatile than the market, and a beta of greater than 1 indicates that the stock is more volatile than the market. In this case, the beta of the stock is .78, which indicates that the stock is less volatile than the market. Therefore, the return on the stock is expected to be less than the market rate of return of 10 percent.

If the Market Rate of Return Is 10 Percent and the Beta