A stocks contribution to the market risk of a well-diversified portfolio is called risk. According to the Capital Asset Pricing Model (CAPM), this risk can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market.

Based on your understanding of the beta coefficient, indicate whether each statement in the following table is true or false:

Statement	True	False
Stock As beta is 1.0; this means that the stock moves in the same direction and magnitude as the market.
Higher-beta stocks are expected to have lower required returns.
A stock that is more volatile than the market will have a beta of more than 1.0.

There are different ways of calculating the beta coefficient for a stock. Using the information given in the following table, calculate the beta coefficient of Stock i:

Data
Stock is standard deviation	42.00%
Markets standard deviation	38.40%
Correlation between Stock i and the market	0.78
Beta coefficient of Stock i:

To calculate the beta of another company, using regression analysis, you get the value of R as 0.59. Based on your calculation, which of the following interpretations is true?

59% of the variance in the companys returns can be explained by the market returns.

41% of the variance in the companys returns can be explained by the market returns.