Suppose the Following Equation Best Describes the Evolution of β

question 2

Multiple Choice

Suppose the following equation best describes the evolution of β over time:β_t = 0.4 + 0.6β_{t − 1}.If a stock had a β of 0.9 last year, you would forecast the β to be _______ in the coming year.

• A) 0.45
• B) 0.60
• C) 0.70
• D) 0.94

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