Question

If a firm's beta was calculated as 1.3 in a regression equation, a commonly used adjustment technique would provide an adjusted beta of Group of answer choices zero or less. between 0.3 and 0.9. less than 1.0 but greater than zero. greater than 1.3. between 1.0 and 1.3.

Answer 1

Answer: Between 1.0 and 1.3

Step-by-step explanation:

The adjusted beta technique assumes that the beta of the security is moving towards the market beta overtime so it adjusts the security's beta by computing a weighted average of the security's beta and the market beta in the following manner;

Adjusted beta = (.67) * Security beta + (.33) * 1.0

= 0.67 * 1.3 + 0.33

= 1.2