Schembri Investment Company Limited wishes to assess then impact of changes in the market return on an asset that has a beta of 0.8.
a. If the market return increased by 42%, what impact would this change be expected to have on the asset’s return?
b. If the market return decreased by 32%, what impact would this change be expected to have on the asset’s return?
c. If the market return did not change, what impact, if any, would be expected on the asset’s return?
d. Would this asset be considered more or less risky than the market? Explain.