Stock A has a standard deviation of 20 percent and a correlation coefficient of 0.64 with...
Stock A has a standard deviation of 20 percent and a correlation coefficient of 0.64 with market returns. The expected return of the market is 12 percent with a standard deviation of 15 percent. The risk-free rate is 5 percent. What is the beta of Stock A?
Homework Answers
Beta of a stock = correlation of stock with market*standard deviation of stock/standard deviation of market
here, correlation of stock A with market = 0.64
standard deviation of stock A = 20%
standard deviation of market = 15%
So, Beta of stock A = 0.64*20/15 = 0.8533
So, beta of stock A is 0.8533
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