Use the Information for the Question(s)below

question 20

Multiple Choice

Use the information for the question(s) below.
Suppose the market portfolio's excess return tends to increase by 30% when the economy is strong and decline by 20% when the economy is weak.A type S firm has excess returns that increase by 45% when the economy is strong and decrease by 30% when the economy is weak.A type I firm will also have excess returns of either 45% or -30%,but the type I firm's excess returns will depend only upon firm-specific events and will be completely independent of the state of the economy.
-What is the Beta for a type I firm?

• A)1.0
• B)0.75
• C)0.0
• D)1.5

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Definitions:

Physiological Reaction

A bodily response to a stimulus, such as an increase in heart rate, sweating, or the release of adrenaline, often not under conscious control and indicative of physiological processes.

Arousal Level

The physiological and psychological state of being awoken or stimulated to action.

Self-Discrepancy Theory

The theory that people feel anxiety when they fall short of how they ought to be but feel sad when they fall short of how they ideally want to be.

Ideal Self

A person's conception of how they would like to be, embodying their goals, aspirations, and unique potential.