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problem: The returns from the past thirteen quarters on Mercantile Bank Corporation & the market are listed below.

Mercantile

Market

-0.009

0.023

0.051

0.058

-0.001

-0.02

-0.045

-0.05

0.085

0.071

0

0.012

-0.08

-0.075

0.02

0.05

0.125

0.12

0.11

0.049

-0.1

-0.03

0.04

0.028

The covariance of Mercantile Bank Corporation's return with the market's return is 0.038711. The market variance is 0.038588.The expected returns on Mercantile and the market are 0.016333 & 0.019667, respectively.

[A] Determine the beta of Mercantile Bank Corporation stock?

[B] Is Mercantile's beta higher or lower than determine the beta of the average stock?

Note: To determine the beta of Mercantiles stock, divide the covariance of the stock's return with the market's return by the market variance.

Portfolio Management, Finance

  • Category:- Portfolio Management
  • Reference No.:- M919656

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