Interpreting beta A firm wishes to assess the impact of changes in the market re

Question

Interpreting betaA firm wishes to assess the impact of changes in the market return on an asset that has a beta of 1.7.

a.If the market return increased by 12%, what impact would this change be expected to have on the asset's return?

b. If the market return decreased by 12%, 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?

(Round to one decimal place. Enter a negative percentage number if the asset return decreases.)

Explanation / Answer

a Stock return will increase by 20.40% 12%*1.7 b Stock return will decrease by 20.40% 12%*1.7 c Stock return will not be affected. d Asset is more risky than market. Beta is more than 1

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