The beta of a security is calculated by dividing the
A)variance of the market by the covariance of the security with the market.
B)correlation of the security with the market by the variance of the security.
C)variance of the market by the correlation of the security with the market.
D)covariance of the security with the market by the variance of the market.
E)covariance of the security with the market by the variance of the security.

Question

Quizplus · Accepted Answer

Beta is calculated as the covariance of the security's returns with the market's returns divided by the variance of the market's returns. This measures the security's sensitivity to market movements.

The Beta of a Security Is Calculated by Dividing the