Suppose the following equation best describes the evolution of $\beta$ over time: $\beta$ _t = 0.30 + 0.70 $\beta$ _t- ₁
If a stock had a $\beta$ of 0.82 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 = 0.30 + 0.70

\beta

_t- ₁
If a stock had a

\beta

of 0.82 last year, you would forecast the

\beta

to be _______ in the coming year.

Quizplus · Accepted Answer

To calculate the forecasted F1F1F1S1F1F1F10, we plug in the given F1F1F1S1F1F1F10 value of 0.82 into the equation: F1F1F1S1F1F1F10_t = 0.30 + 0.70(0.82)_(1-)-₁ Simplifying this equation gives: F1F1F1S1F1F1F10_t = 0.328 + 0.574_{- 0.128} We don't have any information about the value of _or, so we cannot directly solve for F1F1F1S1F1F1F10. Instead, we can make an assumption about the future values of _and. One reasonable assumption is that they will remain at their current values (i.e. _{= 1 and} = 0). In that case, we get: F1F1F1S1F1F1F10_t = 0.328 + 0.574 - 0.128(0) = 0.902 Therefore, the forecasted F1F1F1S1F1F1F10 for the coming year is 0.902. The closest answer choice is D, 0.87.

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