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Notes. Chapter 10, example 7 (beta calculation)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Notes. Chapter 10, example 7 (beta calculation)

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.
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  • November 12, 2011 at 4:29 pm #50451
    m0rgan
    Member
    • Topics: 1
    • Replies: 9
    • ☆

    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)?

    November 19, 2011 at 10:42 pm #89603
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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

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