On average, when the overall market changes by 10%, the stock of Veracity Communications changes 12%. Veracity's beta is
A) 1.2.
B) 8.33%.
C) 12%.
D) Insufficient information is provided

Question

Quizplus · Accepted Answer

The beta of a stock measures the stock's sensitivity to changes in the overall market. The average percentage change in Veracity Communications' stock (12%) is higher than the average percentage change in the overall market (10%), which means that Veracity is more sensitive to market changes than the average stock. The beta of a stock is equal to the stock's percentage change divided by the market's percentage change, so Veracity's beta can be calculated as 12%/10% = 1.2. Therefore, the correct choice is A) 1.2.

On Average, When the Overall Market Changes by 10%, the Stock