Question

If a stock consistently goes down (up) by 1.6% when the market portfolio goes down (up) by 1.2%, then its beta equals: Select one:

a. 1.04
b. 1.24
c. 1.33
d. 1.40

Answer 1

The beta of the stock is 1.33.

Step-by-step explanation:

To determine the beta of a stock, we need to compare its returns to the returns of the market as a whole. In this case, the stock consistently goes down by 1.6% when the market portfolio goes down by 1.2%. This means that the stock's beta can be calculated as the ratio of the stock's returns to the market returns. We can calculate this as follows:

Beta = (Stock Return / Market Return) = (-1.6% / -1.2%) = 1.33

Therefore, the correct answer is c. 1.33.