I'm studying for the Series 65 and had a question the other day that said the following:
A customer's portfolio has a beta coefficient of 1.1. If the overall market increases by 10%, the portfolio's value is likely to:
a) Decrease by 10%
b) Increase by 10%
c) Increase by 11%
d) Decrease by 10%
The answer, according to them, was c) Increase by 11%. Which seems wrong to me. Wouldn't it be b) Increase by 10%?? The way my book explains it is that if the beta value was 1, it would follow the market exactly. If the beta value was 1.5, it would increase 50% more than the market. So if it was 1.1, it would increase 10% more, right? I feel like the question writer just got confused by the "1.1" and moved the decimal place over, but I want to make sure I'm understanding beta correctly before moving on.
Submitted January 15, 2017 at 02:03PM by swissarm http://ift.tt/2izXEby
