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How are betas used in risk analysis

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Reference no: EM132752193

Assume that the expected rates of return and the beta coefficients of the alternatives supplied by an independent analyst are as follows:

Security              Estimated rate of returns        Beta

Nescom                              5%                      1.5
Market                                   4                          1
Pk_Steel                              3.5                        0.75
T_Bills                                   3                              0
Nawab                                 1                              -0.6

Problem 1: What is a beta coefficient, and how are betas used in risk analysis?

Problem 2: Do the expected returns appear to be related to each alternative's market risk?

Problem 3:  Is it possible to choose among the alternatives on the basis of the information developed thus far?

Reference no: EM132752193

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