TYPE OF ECONOMY    RETURN ON MARKET(%)       EXPECTED RETURN ON FUJI(%)

bear                2.50                       3.40
bull               16.3                       12.8

a Calculate the beta of Fuji

Hi bladehulk!!


Variables definition:

E(R)_bull = expected return on Fuji in a bull market 
E(R)_bear = expected return on Fuji in a bear market
RM_bull	= return on the market portfolio in a bull market
RM_bear	= return on the market portfolio in a bear market


By definition the Beta of a security is the slope of its Security
Characteristic Line (SCL), which is a plot of return on a security as
a function of the return on the market.

The slope of the Security Characteristic Line (SCL) of Fuji's stock is:

BETA = (E(R)_bull - E(R)_bear) / (RM_bull - RM_bear) =
     = (12.80 - 3.40) / (16.30 - 2.50) =
     = 0.68116

The Beta of the Fuji's stock is 0.68.


I hope this helps you. Feel free to request for a clarification if you need it.


Regards,
livioflores-ga