Reading 11- LOS D : Q5 class, between, market, style

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5.The covariance between stock A and the market portfolio is 0.05634. The variance of the market is 0.04632. The beta of stock A is:

A)   0.8222.

B)   0.0026.

C)   1.0000.

D)   1.2163.

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The correct answer was D)

Beta = Cov(R_A,R_M) / Var(R_M) = = 0.05634/0.04632 = 1.2163 = beta.