Response to the following problem:
Share A has a beta of 0.80, share B has a beta of 1.40, and share C has a beta of -0.30.
a. Rank these shares from the most risky to the least risky.
b. If the return on the market portfolio increases by 12%, what change in the return for each of the shares would you expect?
c. If the return on the market portfolio declines by 5%, what change in the return for each of the shares would you expect?
d. If you felt the shares market was about to experience a significant decline, which share would you be most likely to add to your portfolio? Why?
e. If you anticipated a major sharemarket rally, which share would you be most likely to add to your portfolio? Why?