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John Moffat.
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- February 21, 2018 at 10:02 am #438194
Hello
Could you please clarify me on the qs 34 named Mercury training in bpp kit ..we are averaging the asset beta for Mercury ..why we are averaging ..also the figures it 0.67 * 1.3865 ,+ 0.33*0.75 .I don’t understand the figures 0.67 and 0.33 where do they come from ..the beta asset 1.3865 is for Jupiter and 0.75 is for financial services asset beta
And while writing u this query I realise that the question says that financial services account for one third of the total revenue of Mercury so is it the figures 1/3 …0.33 is assigned to financial services and the rest to training business
Am I right ?
I would like to understand why we take the average .are we always going average asset beta for company in every question.
Thank in advance .
February 21, 2018 at 10:54 am #438223If ever two streams with different betas are merged, then the overall beta is the weighted average of the individual betas.
It is often relevant in the exam, but only if two streams are being merged.
I explain all of this (with examples) in my free lectures on CAPM.
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