Betas tend to move towards 1.0 with passage of time are classified as__________?
Correct answer: D. Adjusted betas
- A. Standard betas
- B. Varied betas
- C. Historical betas
- D. Adjusted betas
Explanation
Adjusted betas move historical beta estimates toward 1.0 because empirical research suggests that extreme betas tend to become less extreme over time. This adjustment is commonly used when estimating future systematic risk.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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