Beta is useful in the calculation of:
A) the company's variance.
B) the companies discount rate.
C) the company's standard deviation.
D) unsystematic risk.
E) the risk free-rate or the market rate.

Question

Quizplus · Accepted Answer

Beta is used in the Capital Asset Pricing Model (CAPM) to calculate a company's expected return, which is part of determining the discount rate. The discount rate reflects the risk associated with the company's future cash flows. Beta measures the volatility of a stock or portfolio in relation to the overall market, thus helping in assessing the risk and determining the appropriate discount rate.

Beta Is Useful in the Calculation Of