Computing the firm asset beta

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1. The stock of the Goldy Corporation has a beta of -0.25. If the expected return on the market decreases by 4%, then the expected return on Goldy should

increase by 1%

decrease by 1%

increase by 1.6%

decrease by 1.6%

2. You have analyzed four stocks and obtained the following results:

Stock   Return    Standard     Beta   

K      22%       35%     2.8

I       10%       17%     0.8

N       8%       15%     0.2

G      10%       13%     0.5

Refer to the information above. A risk-averse investor, who will be adding the stock to his already well-diversified portfolio, would choose to invest in Stock

3. Your firm uses 30% debt financing and 70% equity financing. The beta of the debt is 0.1 and the beta of the equity is 1.4. What is your firm's asset beta?

Reference no: EM132412381

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