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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.

  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

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