Review the excerpted table of historic returns shown below. The returns have all been annualized after having calculated monthly returns for the previous five years. In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments.
Time Period #
Market Return
Firm W
Firm X
Firm Y
Firm Z
T-Bill
1
0.333
0.191
0.218
0.955
0.601
0.035
2
-0.144
-0.423
-0.632
-0.747
-0.472
0.039
3
0.143
0.348
0.470
0.379
0.378
0.040
4
0.316
0.871
0.868
-0.192
0.502
0.036
5
0.178
0.912
0.499
0.694
0.364
6
-0.014
0.532
0.168
-0.671
-0.064
0.038
…
59
0.374
0.556
1.014
0.023
0.698
0.037
60
0.173
0.547
0.092
0.658
0.222
Average Return
0.082
0.113
0.067
0.167
0.121
0.029
Standard Deviation
0.156
0.369
0.497
0.398
0.456
0.011
Beta
1.00
1.21
0.89
1.41
1.25
0.00
Firm Z has a Debt/Equity Ratio of 0.25 and a Tax Rate of 20%.
What is the beta of a project (rounded to two places) if said project is twice as risky as typical Firm Z projects?
Multiple Choice
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