A firm with an asset beta of 0.5 has a quarter of its assets as excess cash
Fantastic news! We've Found the answer you've been seeking!
Question:
A firm with an asset beta of 0.5 has a quarter of its assets as excess cash (by 'excess cash' I mean
that this cash is not being used to sustain the operations of the firm and is simply lying invested in Tbills).
Suppose it pays half its cash to shareholders and invests the other half in the market (i.e., in a
market index mutual fund like the Vanguard Extended Market Index). What is the firm's asset beta
now?
Posted Date: