a. If the market return increased by 13​%, what impact would this change be expected to have on the​ asset's return? b. If the market return decreased by 9​%, 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?

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter25: Portfolio Theory And Asset Pricing Models
Section: Chapter Questions
Problem 4P
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A firm wishes to assess the impact of changes in the market return on an asset that has a beta of 1.1.
a. If the market return increased by 13​%, what impact would this change be expected to have on the​ asset's return?
b. If the market return decreased by 9​%, 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?
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d.  Would this asset be considered more or less risky than the​ market?
 
The asset is  a. Equally as risky    the market portfolio, which has a beta of a. 1
                      b. less risky than                                                                       b. 0
                      c. more risky than                                                                     c. -1
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