What is the beta (B) of a security of a type S firm whose return increases...

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What is the beta (B) of a security of a type S firm whose return increases 42% on average when the economy is strong and declines 18% when the economy is weak, in response to a 30% increase in the market portfolio's return when the economy is strong and 10% decline when the economy is weak? The economy is equally likely to be strong or weak. The risk-free rate is 6%. Required a) What is the beta (3) of the security? (2 points) b) What would be the estimate of the security's expected return, based on its beta (3) as a measure of its systematic risk? (2 points) c) Does the security's actual expected return equal its estimated expected return in part b? (2 points) What is the beta (B) of a security of a type S firm whose return increases 42% on average when the economy is strong and declines 18% when the economy is weak, in response to a 30% increase in the market portfolio's return when the economy is strong and 10% decline when the economy is weak? The economy is equally likely to be strong or weak. The risk-free rate is 6%. Required a) What is the beta (3) of the security? (2 points) b) What would be the estimate of the security's expected return, based on its beta (3) as a measure of its systematic risk? (2 points) c) Does the security's actual expected return equal its estimated expected return in part b? (2 points)

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a What is the beta 8 of the security Beta Covariance Ri Rm Variance Rm where Ri is the return of the ... View the full answer