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Financial Risk Manager Part 1

Financial Risk Manager Part 1

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A portfolio manager is evaluating the risk-adjusted performance of a group of large-cap industrial company stocks by calculating its beta, a measure of the portfolio's volatility relative to its benchmark. The manager has collected the following data: the correlation coefficient between the portfolio's returns and the benchmark's returns is 0.8, the standard deviation (volatility) of the portfolio's returns is 5%, and the standard deviation (volatility) of the benchmark's returns is 4%. What is the beta of the portfolio compared to its benchmark?

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