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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Notes. Chapter 10, example 7 (beta calculation)
In the lecture notes we are given the following formula:
beta=(covariance inv/mkt)/(variance mkt)
In the example 7 in answers we can see that beta is calculated as:
beta=(covariance inv/mkt)*(total risk of S)/(standard deviation mkt).
Does that mean that the following formula is correct:
(variance mkt)=(standard deviation mkt)/(total risk of S)?
No! 🙂
In example 7 you are given the coefficient of correlation, which is the covariance/ (std devn mkt * std devn investment)
The variance of anything is the (standard deviation)^2