Use the information for the question(s)below.
Suppose the market portfolio's excess return tends to increase by 30% when the economy is strong and decline by 20% when the economy is weak.A type S firm has excess returns that increase by 45% when the economy is strong and decrease by 30% when the economy is weak.A type I firm will also have excess returns of either 45% or -30%,but the type I firm's excess returns will depend only upon firm-specific events and will be completely independent of the state of the economy.
-What is the Beta for a type I firm?

Question

Quizplus · Accepted Answer

C)The systematic risk of the strength of the economy produces at 30% - -20% = 50% change in return for the market portfolio.
The type I firm's return is independent of the economy as a whole so its change = 0%
Beta = 0%/50% = 0

Use the Information for the Question(s)below