Suppose the Following Equation Best Describes the Evolution of β

question 32

Multiple Choice

Suppose the following equation best describes the evolution of β over time: β_t = 0.3 + 0.2β_{t - 1}
If a stock had a β of 0.8 last year, you would forecast the β to be _______ in the coming year.

• A) 0.46
• B) 0.60
• C) 0.70
• D) 0.94

---

Definitions:

Inflationary Wage

Wage increases that match or exceed the rate of inflation, aimed at maintaining or increasing purchasing power over time.

Frictionally Unemployed

Individuals temporarily unemployed while transitioning between jobs, often viewed as a natural part of the labor market.

Rate of Inflation

The rate of inflation is the annual percentage increase in the overall price level of goods and services in an economy over a period of time.

Unemployment Rate

The percentage reflecting those who are in the labor force and are not employed, yet are seeking employment.