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

To determine the stock's covariance with the market portfolio, we can use the relationship between beta (\(\beta\)), the covariance (\(\text{Cov}(S,M)\)) between the stock and the market, and the variance of the market (\(\text{Var}(M)\)):

\[
\beta = \frac{\text{Cov}(S,M)}{\text{Var}(M)}
\]

Rearranging the formula to solve for \(\text{Cov}(S,M)\):

\[
\text{Cov}(S,M) = \beta \times \text{Var}(M)
\]

Given:
- \(\beta = 1.9\)
- \(\text{Var}(M) = 0.85\)

Now, substituting the values:

\[
\text{Cov}(S,M) = 1.9 \times 0.85 = 1.615
\]

Thus, the covariance between the stock and the market portfolio is **1.615**.

### Correct answer: **1.615**

Would you like any further details on this, or do you have any other questions?

Here are 5 additional questions that expand on this topic:

1. How does a beta value greater than 1 affect a stock's risk in relation to the market?
2. What is the significance of a stock's variance, and how does it differ from covariance?
3. How would the stock's covariance change if the market variance increased?
4. How would you interpret a stock with a beta of less than 1?
5. Can a stock's beta change over time, and if so, why?

**Tip**: Beta measures a stock's sensitivity to market movements. A higher beta indicates more volatility compared to the market.

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?

Learn how to calculate the covariance of a stock with the market portfolio, given the stock's beta of 1.9 and a market variance of 0.85. This problem demonstrates the relationship between beta, covariance, and market variance, using key portfolio theory concepts.

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