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A stock has a correlation with the market of 0.49. The standard deviation of the market is 25%, and the standard deviation of the stock is 33%. What is the stock's beta?

A.) 1.55
B.) 0.65
C.) 0.35
D.) 0.37

User Sucotronic
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1 Answer

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Answer:

Stock's beta = 0.65 (Approx)

Step-by-step explanation:

Given:

Correlation = 0.49

Standard deviation of stock (SDs) = 33% = 0.33

Standard deviation of market (SDm) = 25% = 0.25

Find:

Stock's beta

Computation:

Stock's beta = Correlation(SDs) / SDm

Stock's beta = 0.49 (0.33) / 0.25

Stock's beta = 0.65 (Approx)

User Thomas Larsson
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