A beta coefficient of 1.2 represents an asset that Is less responsive than market portfolio Has...

A beta coefficient of 1.2 represents an asset that Is less responsive than market portfolio Has the same response as the market portfolio Up is unaffcted by the market movement Is more responsive that the market portfolio

Expert Solution

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Beta that is systematic risk is determined by: Rate of change of stock return to the rate of change of market return. It is the sensitivity of stock return to Market return.

A higher Beta Represents (greater than 1) that if the stock market index moves by 1% then the stock will move by more than 1% and vice versa.

Example:

Suppose Beta of a stock is 1.2, if stock market index goes up by 1% then the stock will go up by 1.2% and vice versa.

Answer: A beta coefficient of 1.2 represents that an asset is more responsive than that of the market portfolio.

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