Calculate the consumption beta for an asset with a standard deviation of 10%,where the variance of consumption growth is 10% and the covariance between the growth rate in consumption and the asset is 0.015.

A) $ 0.15 $
B) $ 0.50 $
C) $ 0.75 $
D) $ 1.50 $

Question

Calculate the consumption beta for an asset with a standard deviation of 10%,where the variance of consumption growth is 10% and the covariance between the growth rate in consumption and the asset is 0.015.

A) $ 0.15 $
B) $ 0.50 $
C) $ 0.75 $
D) $ 1.50 $

Quizplus · Accepted Answer

The consumption beta is defined as the covariance of the asset with the growth rate of consumption divided by the variance of the growth rate in consumption.That is;0.015/(0.1)² = 0.015/0.01 = 1.50.

Calculate the Consumption Beta for an Asset with a Standard 0.15 0.15 0.15

Calculate the Consumption Beta for an Asset with a Standard $0.15$