8. Beta Calculations. Michael Margolis is a single parent and a motivational training consultant from Rancho Cucamonga,
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8. Beta Calculations. Michael Margolis is a single parent and a motivational training consultant from Rancho Cucamonga, California. He is wondering about potential returns on investments given certain amounts of risk.
Michael invested a total of $6000 in three stocks ($2000 in each) with diff erent betas: stock A with a beta of 0.8, stock B with a beta of 1.7, and stock C with a beta of 2.5.
(a) If the stock market rises 12 percent over the next year, what will be the likely value of each investment?
(b) If the stock market declines 8 percent over the next year, what will be the likely value of each investment?
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