The beta for a company can be estimated by
A) adding up the betas of the individual projects of the company.
B) taking the weighted average of the beta for the individual projects of the company.
C) taking the simple average of the beta for the individual projects of the company.
D) None of the above.

Question

Quizplus · Accepted Answer

The beta for a company can be estimated by taking the weighted average of the beta for the individual projects of the company. This is because the beta of each project is not equally important to the overall risk of the company. The more important projects should be given a higher weight in the calculation of the overall beta.

The Beta for a Company Can Be Estimated by