Respuesta :
1.37 is the beta where a market required return of 13%, if the market return is 9.5%
What is beta of a stock?
A stock with a beta greater than 1.0 fluctuates more than the market over time. A stock's beta is less than 1.0 if it moves less than the market. High-beta equities typically carry higher risks but also have a bigger potential reward. Although they carry less risk, low-beta equities often offer lesser returns.
Because of this, beta is frequently employed as a risk-reward ratio, which aids investors in deciding how much risk they are ready to accept in order to reap the potential rewards. It's crucial to take stock price volatility into account when determining risk. Beta is a useful proximate for risk if you view of risk as the likelihood that a stock would depreciate in value.
For a stock that has a market required return of 13% and market return of 9.5%, beta is
= 13/9.5
= 1.37
Thus, 1.37 is the beta where a market required return of 13%, if the market return is 9.5%
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