Question

A stock has a correlation with the market of .45. The standard deviation of the market is 21%, and the standard deviation of the stock is 35%. The stock beta is ____________.

Answer 1

Answer:

0.74

Explanation:

The calculation of the stock beta is shown below:

= Stock Correlation with the market × (Standard deviation of the stock ÷ standard deviation of the market)

= 0.45 × (35% ÷ 21%)

= 0.74

Simply we divide the standard deviation of the stock by the standard deviation of the stock and then multiplied it by the stock Correlation with the market so that beta can arrive