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The options for the first fill in the blank question are systematic/unsystematic. 8. The beta coefficient A stock's contribution to the market risk of a
The options for the first fill in the blank question are systematic/unsystematic.
8. The beta coefficient A stock's 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: False Statement True A stock that is more volatile than the market will have a beta of more than 1.0 Stock A's 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. 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 i's standard deviation 42.00% Market's 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 R2 as 0.59. Based on your calculation, which of the following interpretations is true? 41% of the variance in the company's returns can be explained by the market returns. 59% of the variance in the company's returns can be explained by the market returnsStep by Step Solution
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