Information is provided below for three companies. The standard deviation of the market return is 0.05 and the expected...

 

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Information is provided below for three companies. The standard deviation of the market return is 0.05 and the expected market risk premium (E(Rm) - rF) equals 0.06. Standard deviation of the market return Expected market risk premium Standard deviation of firm's return.. Covariance of firm's return and market return Edit 12pt View Insert Paragraph For each company, calculate each firm's beta and the relative risk of the firm's security return to the market return based upon their relative standard deviations. Are beta and the relative standard deviations both measures of the firm's risk? Explain. Format V Tools Table 0.05 0.06 BIU Firm 1 0.12 0.003 Firm 2 0.06 0.0025 T v Firm 3 0.10 0.004 :

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Beta measures the sensitivity of a firm s returns to the market returns Beta Covariance Firm Return View the full answer