1. Firm A has a beta of 1.5. Firm B has a beta of 1. Both firms A and B are in the same industry, i.e. have similar assets. Which of the following could be a reason why Firm A has a higher beta than Firm Bs?

1. Firm A has more cyclical revenues than Firm B
2. Firm A has high financial leverage compared to Firm B
3. Firm A has low financial leverage compared to Firm B

1. I only
2. II only
3. I and II
4. II and III
5. I, II and III