A firm wishes to assess the impact of changes in the market retun on an asset th

Question

A firm wishes to assess the impact of changes in the market retun on an asset that has a beta of 0.8. Note: enter a negative percentage number if the asset retrun decreases. 1) if the market return increased by 18%, what impact would this change be expected to have on the assets return? 2) If the market return decreased by 10%, what impact would this change be expected to haev on the assets return? 3) If the market return did not change, what impact if any would be expected on the assets retrun? 4) Would this asset be considered more or less risky than the market?

Explanation / Answer

1) asset return will increase by = 18%*.8 =14.40% 2) asset return will decrease by = 10%*.8 =8% 3) no effect on asset return 4) beta is less than 1 hence asset be considered less risky than the market

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