Suppose the following equation best describes the evolution of $\beta$ over time: $\beta$ _t = 0.31 + 0.82 $\beta$ _t_{- 1}.
If a stock had a $\beta$ of 0.88 last year, you would forecast the $\beta$ to be _______ in the coming year.

Question

Suppose the following equation best describes the evolution of

\beta

over time:

\beta

_t = 0.31 + 0.82

\beta

_t_{- 1}.
If a stock had a

\beta

of 0.88 last year, you would forecast the

\beta

to be _______ in the coming year.

Quizplus · Accepted Answer

To forecast the F1F1F1S1F1F1F10 in the coming year, we need to use the given equation: 
F1F1F1S1F1F1F10S1U1B1tS1U1B0 = 0.31 + 0.82F1F1F1S1F1F1F10S1U1B1tS1U1B0S1U1B1 S1U1B0S1U1B1- 1S1U1B0

Substituting last year's F1F1F1S1F1F1F10 value of 0.88:
0.88S1U1B1tS1U1B0 = 0.31 + 0.82(0.88)S1U1B1tS1U1B0S1U1B1 S1U1B0S1U1B1-1S1U1B0

Simplifying the equation:
0.88S1U1B1tS1U1B0 = 0.9576S1U1B1tS1U1B0S1U1B1 - 1S1U1B0
1.9576S1U1B1tS1U1B0S1U1B1 = 0.88 + S1U1B0
S1U1B1t+1S1U1B0 = (0.88 + S1U1B0) / 1.9576

Therefore, the answer is D) 1.03

Suppose the Following Equation Best Describes the Evolution Of β\betaβ Over Time

Suppose the Following Equation Best Describes the Evolution Of $\beta$ Over Time