You Observe That Telstra Shares and the S&P/ASX 200 Index

question 33

Multiple Choice

You observe that Telstra shares and the S&P/ASX 200 index have the following weekly returns: If this pattern of returns is typical of Telstra shares, and you calculated a beta against the S&P/ASX 200, which of the following is true?

• A)Telstra's beta is zero.
• B)Telstra's beta is positive.
• C)Telstra's beta is negative.
• D)Cannot be determined from information given.

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Definitions:

Expected Return

The weighted average of all possible returns for a given investment, with weights being the probabilities of each outcome.

Risk-Free Rate

The hypothetical return rate on an investment that carries no risk of losing money, commonly illustrated by the interest rate on government securities.

Multifactor Model

A financial model that employs multiple factors in its calculations to explain market phenomena and/or equilibrium asset prices.