Portfolio Management Q128
128The following information is provided about a stock market index m and security i:
| Statistic | Value |
| Covariance between market return and security return [Cov(Ri, Rm)] | 0.01208 |
| Correlation coefficient between market return and security return (ρi,m) | 0.35 |
| Standard deviation of market return (σm) | 0.15 |
The beta of security i, βi, is closest to:
- Option : C
- Explanation : The beta of security i is calculated as: βi = Cov(Ri, Rm)/σm2 = 0.01208/(0.15)2 = 0.54.
