Suppose the following equation best describes the evolution of β over time:β_t = 0.36 + 0.85β_t ₋₁.If a stock had a β of 0.6 last year, you would forecast the β to be _______ in the coming year. A) 0.45 B) 0.60 C) 0.87 D) 0.75

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Quizplus · Accepted Answer

The equation provided suggests that the evolution of β over time is dependent on its previous value. Given a β of 0.6 last year, we substitute this value into the equation: 0.36 + 0.85(0.6) = 0.36 + 0.51 = 0.87. Therefore, the forecasted β for the coming year is 0.87.

Suppose the Following Equation Best Describes the Evolution of β