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I got asset beta 2.041
But I can get 27.4% from 7% +(2.04×10%). Isn’t it 7.204%?No it isn’t!!
2.04 x 10% = 20.4%
7% + 20.4% = 27.4%.
(or, if you prefer, 7% is the same as 0.07. 10% is the same as 0.10.
So, 0.07 + (2.04 x 0.10) = 0.07 + 0.204 = 0.274, which is the same as 27.4%)🙂
Did you watch my free lectures on this before attempting the test?
yes, I watched them, you wrote (18-10)*1.7 or whatever beta was. But if you put 10%x2 into calculator, you wouldn’t get 20, would you? You would get 0.2.
I will use the second way, where % are in decimal fractions to avoid silly mistakes (or at least some of them!).
thank you very much for your help.
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