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Basic Question 10 of 11
Assume the risk-free rate is 4%. The expected return on the market portfolio is 15% and its standard deviation is 20%. A company has a standard deviation of 40% and a correlation of 0.8 with the market. What is the company's beta?
User Contributed Comments 2
| User | Comment |
|---|---|
| papajohn | good one |
| HolzGe1 | 1) Cov(i,M) = rho * sigma_i * sigma_M = 0.8 * 20% * 40% = 0.064 2) Beta = Cov(i,M) / sigma_M² = 0.064 / 0.2² = 1.6 |
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Learning Outcome Statements
calculate and interpret beta
CFA® 2024 Level I Curriculum, Volume 2, Module 2.