Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 0 of 27
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 |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
calculate and interpret beta
CFA® 2025 Level I Curriculum, Volume 2, Module 2.