If an investment is riskier, using a higher beta coefficient to analyze the alternative reduces the investment's internal rate of return.

Name: If an investment is riskier, using a higher beta coefficient to analyze the alternative reduces the investment's internal rate of return.
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Question

If an investment is riskier, using a higher beta coefficient to analyze the alternative reduces the investment's internal rate of return.​

Quizplus · Accepted Answer

The beta coefficient measures an investment's volatility compared to the market, not directly affecting the internal rate of return (IRR), which is determined by the investment's cash flows and the cost of capital.

If an Investment Is Riskier, Using a Higher Beta Coefficient