Math Problem Statement

You are following a stock and would like to determine how it varies with the market portfolio. You have the following information: the stock has a beta of 1.9 and a variance of 0.75. The market variance is 0.85. What is the stock's covariance with the market portfolio?

Question 4 options:

1.615

1.860

0.540

0.698

Solution

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Math Problem Analysis

Mathematical Concepts

Finance
Statistics
Portfolio Theory

Formulas

Cov(S,M) = β × Var(M)
β = Cov(S,M) / Var(M)

Theorems

Capital Asset Pricing Model (CAPM)

Suitable Grade Level

Undergraduate (Finance, Economics)