A stock has a standard deviation of 22.4 percent and a covariance with the market of .0169. The market has a standard deviation of 13.2 percent. What is the beta of this stock?
A) .29
B) .57
C) .92
D) .97
E) 1.01

Question

Quizplus · Accepted Answer

The beta of a stock is a measure of its volatility relative to the market. It is calculated by dividing the covariance of the stock with the market by the variance of the market. In this case, the covariance of the stock with the market is .0169 and the variance of the market is (13.2%)^2 = .017424. Therefore, the beta of the stock is .0169/.017424 = .97.

A Stock Has a Standard Deviation of 22