An asset has a standard deviation of 15% and a correlation with the market portfolio of 0.46.If the market has a standard deviation of 25%,what is the beta of the asset?

A) $ 0.25 $
B) $ 0.31 $
C) $ 0.27 $
D) $ 0.28 $

Question

An asset has a standard deviation of 15% and a correlation with the market portfolio of 0.46.If the market has a standard deviation of 25%,what is the beta of the asset?

A) $ 0.25 $
B) $ 0.31 $
C) $ 0.27 $
D) $ 0.28 $

Quizplus · Accepted Answer

Using equation 8.2,the beta of an asset is calculated as the covariance of the asset divided by the market variance.However,the equation can also be rewritten as follows;F1F1F1S1F1F1F10_i = F1F1F1S1F1F1F10_imF1F1F1S1F1F1F10_i/F1F1F1S1F1F1F10_m.Given that F1F1F1S1F1F1F10_im= 0.46,F1F1F1S1F1F1F10_i= 0.15 and F1F1F1S1F1F1F10_m= 0.25,then the beta of the asset is equal to 0.28.

An Asset Has a Standard Deviation of 15% and a Correlation