Estimating and using betas for probable problem


Task 1: Which of the following is NOT a probable problem when estimating as well as using betas?

a. Sometimes, throughout a period when the company is undergoing a revolutionize such as toward more leverage or riskier assets, the computed beta will be drastically dissimilar from the "true" or "anticipated future" beta

b. The beta of the "average stock," or "the market," can change over time, sometimes significantly.

c. Sometimes the past data used to compute beta don’t reflect the likely risk of the firm for the future because situations have changed.

d. All of the statements above are correct.

e. The fact that the security or project might not have a past history that can be employed as the basis for computing beta.

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Financial Accounting: Estimating and using betas for probable problem
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