The chief financial officer of Adobe Systems, a software manufacturing firm, has approached you for some advice regarding the beta of his company. He subscribes to a service that estimates Adobe System’s beta each year, and he has noticed that the beta estimates have gone down every year since 1991—2.35 in 1991 to 1.40 in 1995. He would like the answers to the following questions

a. Is this decline in beta unusual for a growing firm?

b. Why would the beta decline over time?

c. Is the beta likely to keep decreasing over time?