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Determine the Beta for Stock a Based on the Following

question 109

Essay

Determine the Beta for Stock A based on the following set of returns.Of course, the reliability of a Beta calculated with only four data points may be low.Interpret the Beta that you have calculated.
 Stock A Returns  Market Returns 6.0%5.0%15.0%12.5%4.2%3.5%9.0%7.5%\begin{array} { | c | c | } \hline \text { Stock A Returns } & \text { Market Returns } \\\hline 6.0 \% & 5.0 \% \\\hline 15.0 \% & 12.5 \% \\\hline - 4.2 \% & - 3.5 \% \\\hline 9.0 \% & 7.5 \% \\\hline\end{array}

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products, based on a planned level of activity.

Direct Labor-hours

The sum of hours logged by workers directly engaged in creating products.

Manufacturing Overhead

Manufacturing overhead encompasses all costs of manufacturing beyond direct materials and direct labor, including expenses like factory equipment depreciation and quality control.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to production activities based on a certain base, such as direct labor hours or machine hours.

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