Answer: 0.5

## Explanation The beta of an asset is calculated using the formula: \[\beta = \rho \times \frac{\sigma_{asset}}{\sigma_{market}}\] Where: - \(\rho\) = correlation coefficient between asset and market returns = 0.7 - \(\sigma_{asset}\) = standard deviation of asset returns = 10% - \(\sigma_{market}\) = standard deviation of market returns = 14% Substituting the values: \[\beta = 0.7 \times \frac{10\%}{14\%} = 0.7 \times 0.7143 = 0.5\] Therefore, the beta of the asset is **0.5**. ### Key Points: - Beta measures the sensitivity of an asset's returns to market returns - A beta of 0.5 means the asset is half as volatile as the market - This calculation is fundamental in the Capital Asset Pricing Model (CAPM)

Author: Tanishq Prabhu