Answer: 1.2

## Explanation The formula for calculating beta is: $$\beta_i = \rho_{i,m} \left( \frac{\sigma_i}{\sigma_m} \right)$$ Where: - $\beta_i$ = beta of the asset - $\rho_{i,m}$ = correlation coefficient between asset and market returns = 0.8 - $\sigma_i$ = standard deviation of asset returns = 30% = 0.3 - $\sigma_m$ = standard deviation of market returns = 20% = 0.2 Substituting the values: $$\beta_i = 0.8 \left( \frac{0.3}{0.2} \right) = 0.8 \times 1.5 = 1.2$$ Therefore, the asset's beta is **1.2**. **Why other options are incorrect:** - **A (0.24)**: This would be the result if you multiplied the correlation coefficient by the ratio of market to asset standard deviation (0.8 × 0.2/0.3 = 0.8 × 0.667 = 0.533) or made other calculation errors - **B (2.4)**: This would be the result if you incorrectly calculated 0.8 × 3.0 instead of 0.8 × 1.5 - **C (1.4)**: This appears to be an arbitrary value not supported by the calculation

Author: Tanishq Prabhu