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Q: Calculating Beta ( Answered,   0 Comments )
Subject: Calculating Beta
Category: Business and Money > Finance
Asked by: bladehulk-ga
List Price: $15.00
Posted: 15 Nov 2006 14:42 PST
Expires: 15 Dec 2006 14:42 PST
Question ID: 783067

bear                2.50                       3.40
bull               16.3                       12.8

a Calculate the beta of Fuji
Subject: Re: Calculating Beta
Answered By: livioflores-ga on 15 Nov 2006 20:14 PST
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.

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