The Correlation Coefficient Between Stock a and the Market Portfolio

question 7

Multiple Choice

The correlation coefficient between stock A and the market portfolio is +0.6. The standard deviation of return of the stock is 30% and that of the market portfolio is 20%. Calculate the beta of the stock.

• A) 1.1
• B) 1.0
• C) 0.9
• D) 0.6

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Definitions:

Valence Electrons

The outermost electrons of an atom, which determine its chemical bonding properties.

Chemical Properties

Chemical properties are characteristics of a substance that determine how it interacts with other substances during chemical reactions, defining its composition and behavior.

Buffer

A solution that resists changes in pH when acid or alkali is added to it.

Capillary Action

The ability of a liquid to flow in narrow spaces without the assistance of, or even in opposition to, external forces like gravity.