The beta of security is calculated by dividing

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Reference no: EM132002693

1. The beta of a security is calculated by dividing the:

a. Covariance of the security with the market by the variance of the market.

b. Correlation of the security with the market by the variance of the market.

c. Variance of the market by the covariance of the security with the market.

d. Variance of the market by the correlation of the security with the market.

e. None of the others.

2. You are considering purchasing stock S. This stock has an expected return of 8% if the economy booms and 3% if the economy goes into a recessionary period. The overall expected rate of return on this stock will:

a. Be equal to one-half of 8% if there is a 50% chance of an economic boom.

b. Vary inversely with the growth of the economy.

c. Increase as the probability of a recession increases.

d. Be equal to 75% of 8% if there is a 75% chance of a boom economy.

e. Increase as the probability of a boom economy increases.

Reference no: EM132002693

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