Exhibit 18-6
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Given the following information evaluate the performance of Cloud Incorporated (CI). $R_{CI} 0.17$ $ \quad $ $ \quad $ $B_{CI}=1.05$ $ \quad $ $ \quad $ $\mathrm{R}_{\mathrm{f}}=0.07$ $ \quad $ $ \quad $ $\mathrm{R}_{\mathrm{m}}=0.12$
-Refer to Exhibit 18-6. Calculate CI's risk.
A) 0.1225
B) 0.1000
C) 0.0525
D) 0.0475
E) 0.0325

Question

Exhibit 18-6
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Given the following information evaluate the performance of Cloud Incorporated (CI). $R_{CI} 0.17$  $ \quad $  $ \quad $  $B_{CI}=1.05$    $ \quad $  $ \quad $  $\mathrm{R}_{\mathrm{f}}=0.07$    $ \quad $  $ \quad $  $\mathrm{R}_{\mathrm{m}}=0.12$
-Refer to Exhibit 18-6. Calculate CI's risk.
A) 0.1225
B) 0.1000
C) 0.0525
D) 0.0475
E) 0.0325

Quizplus · Accepted Answer

CI's risk is calculated using the formula for the beta coefficient ($B_{CI}$), which measures the volatility or risk of CI's stock in comparison to the market. The beta of CI is given as 1.05, which means CI's stock is 5% more volatile than the market. However, the question asks for CI's risk, not how to interpret the beta. The beta itself, 1.05, is a direct measure of CI's risk relative to the market, but none of the provided choices directly translate the beta value into a risk measure in the context typically meant by "calculate CI's risk." Therefore, the question seems to be asking for something that isn't directly calculable from the given information (R_CI, B_CI, R_f, R_m) in the traditional sense of calculating risk (e.g., standard deviation, variance). The beta value (B_CI = 1.05) is the closest answer to CI's risk relative to the market, but this interpretation doesn't match the options given, indicating a possible misunderstanding in the question's intent.

Exhibit 18-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) RCI0.17R_{CI} 0.17RCI​0.17

Exhibit 18-6
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $R_{CI} 0.17$