Question

If a firm's beta was calculated as 0.6 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta ofA) less than 0.6 but greater than zero.B) between 0.6 and 1.0.C) between 1.0 and 1.6.D) greater than 1.6.E) zero or less.

Answer 1

If a firm's beta was calculated as 0.6 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta that is between 0.6 and 1.0, as it is typical to adjust betas towards 1.0 to reflect the average risk of the market. Therefore, the correct answer is (B) between 0.6 and 1.0.