The correlation coefficient between stock H and the market portfolio is 0

Finance Dec 24, 2020

The correlation coefficient between stock H and the market portfolio is 0.6. The standard deviation of returns for stock H is 35% and that for the market is 20%. Calculate the CAPM-beta of the stock. A 1.40 B 1.05 0.95 D) 0.45

Expert Solution

Beta = correlation coefficient between market and stock *(standard deviation of stock returns/standard deviation of market returns)

Beta = 0.6 * (0.35 / 0.2)

Beta = 0.6 * 1.75

Beta = 1.05

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