Calculating Beta

Posted in xn--kfs74mzzid01b.com edit by jack on January 7th, 2009

  • TYPE OF ECONOMY RETURN ON MARKET(%) EXPECTED RETURN ON FUJI(%) bear 2.50 3.40 bull 16.3 12.8 a Calculate the beta of Fuji


  • Hi bladehulk!! Variables definition: E(R)_bull = expected return on Fuji in a bull market E(R)_bear = expected return on Fuji in a bear market RM_bull = return on the market portfolio in a bull market RM_bear = return on the market portfolio in a bear market By definition the Beta of a security is the slope of its Security Characteristic Line (SCL), which is a plot of return on a security as a function of the return on the market. The slope of the Security Characteristic Line (SCL) of Fuji's stock is: BETA = (E(R)_bull - E(R)_bear) / (RM_bull - RM_bear) = = (12.80 - 3.40) / (16.30 - 2.50) = = 0.68116 The Beta of the Fuji's stock is 0.68. I hope this helps you. Feel free to request for a clarification if you need it. Regards, livioflores-ga







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