Based on the data in the table below, for a 13% decline in the market, what do y

Question

Based on the data in the table below, for a 13% decline in the market, what do you expect to lose in each investment: (1) A $1,500 investment in EBay, (2) a $2,000 investment in Abbott Laboratories, (3) a $1,500 investment in Walt Disney.

EBay

Abbott Laboratories

Walt Disney

Beta

1.48

0.31

1.21

The investment in EBay is expected to lose? (Round to the nearest dollar.)

The investment in Abbott Laboratories stock is expected to lose?(Round to the nearest dollar.)

The investment in Walt Disney is expected to lose? (Round to the nearest dollar.)

Which investment are expected to lose the most?(Select the best choice below.)

A.

Walt DisneyWalt Disney

B.

Abbott Laboratories

C.

EBayEBay

D.

All the stocks will loose the same percentage,

13%

EBay

Abbott Laboratories

Walt Disney

Beta

1.48

0.31

1.21

Explanation / Answer

1) The investment in EBay is expected to lose?

Beta*13% = 1.48*13% = 18.24%

Expected loss = $1500*19.24% = $1500*0.1924 = $289

2) The investment in Abbott Laboratories stock is expected to lose?

Beta*10% = 0.31*13% = 4.03%

Expected loss = $2000*4.03% = $2000*0.0403 = $81

3) The investment in Walt Disney is expected to lose?

Beta*10% = 1.21*13% = 15.73%

Expected loss = $1500*15.73% = $1500*0.1573 = $236

4) Which investment are expected to lose the most?

EBay. Becuase, the beta value is large for that and hence the loss is more.

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