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please show formulas P821 Betas Answer the questions below for assets A to D shown in the table. Asset Beta A 0.50 B 1.60 C

please show formulas

P821 Betas Answer the questions below for assets A to D shown in the table.

Asset

Beta

A

0.50

B

1.60

C

20.20

D

0.90

What impact would a 10% increase in the market return be expected to have on each assets return?

What impact would a 10% decrease in the market return be expected to have on each assets return?

If you believed that the market return would increase in the near future, which asset would you prefer? Why?

If you believed that the market return would decrease in the near future, which asset would you prefer? Why?

Problem P8-21:

Parts a and b:

Asset

Beta

Increase in Market Return

Impact of Increase

Decrease in Market Return

Impact of Decrease

A

0.50

0.10

-0.10

B

1.60

0.10

-0.10

C

-0.20

0.10

-0.10

D

0.90

0.10

-0.10

Part c:

If you were certain that the market return would increase in the near future, which

asset would you prefer and why?

Part d:

If you were certain that the market return would decrease in the near future, which

asset would you prefer and why?

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