Question

On average, when the overall market changes by 10%, the stock of Veracity Communications changes 12%. What is Veracity's beta?

Select one:

a. 1.2

b. 12%

c. 8.33%

d. Insufficient information is provided

Beta is a statistical measure of

Select one:

a. the relationship between an investment's returns and the market return.

b. the standard deviation

c. hyperbolic

d. total risk

The capital asset pricing model

Select one:

a. depicts the total risk of a security.

b. measures risk as the correlation coefficient between a security and market rates of return.

c. provides a risk-return trade-off in which risk is measured in terms of the market returns.

d. provides a risk-return trade-off in which risk is measured in terms of beta.

Answer 1

Market return changes by 10%

stock of Veracity Communications changes by 12%

Beta formula = change in stock return/change in Market return

=12%/10%

=1.2

So Veracity beta is 1.2

Answer is a

Answer 2

Beta is statistical measure that depicts the relationship between Market return and investment or stock return. If beta is positive, then investment return will move positive with Market and vice versa.

So answer is a

Beta is a statistical measure of the relationship between an investment's returns and the market return.

Answer 3

Capital asset pricing model provides the investment return based on systematic risk that is called beta. It provides a risk-return trade-off in which risk is measured in terms of beta.

So answer is d,