Question

	company 1	company 2	company 3	company 4	market
1/1/2020	10%	10%	10%	10%	10%
12/1/2019	20%	40%	10%	40%	20%
11/1/2019	30%	30%	50%	30%	30%
10/1/2019	30%	50%	30%	20%	40%
9/1/2019	40%	40%	20%	10%	50%

a, What is the beta of the company 3? (hint: check slope)

1. 0.3
2. 0.4
3. 0.5
4. 0.6

b, Among company 1, 2, and 3, which one is the most risky one, based on beta?

1. Company 1
2. Company 2
3. Company 3
4. All equal

Answer 1

beta is the slope of the security market line.

Beta is calculated using SLOPE function in Excel. Here, the "x"s are each company's returns (dependent variable) and the "y"s are the market returns (independent variable).

a]

beta of company 3 is 0.4

b]

Company 1 and 2 are the most risky, as they have the highest beta