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Dear Sir,
In this question, the names of the betas are not mentioned at all. when this is done we will always assume its equity beta? as in, we will assume the beta that they give us of the proxy company is always representing the business and financial risk?also why did they give us the equity beta of ATC, just to confuse the students?
thanksPlease tell me which exam this question is from (I cannot remember the name of every past exam question 🙂 )
It’s a sample paper from December 2010
Link on accas website for the question:
https://www.google.com/url?sa=t&source=web&rct=j&url=http://www.accaglobal.com/content/dam/acca/global/pdf/p4_2010_dec_sample_q.pdf&ved=2ahUKEwiCl7jj6ILvAhWKQkEAHezhASQQFjAAegQIARAC&usg=AOvVaw37-sWWFbvQ376uFIVMvmvaThe betas quoted (in real life as well as in exams) are always equity betas unless the question specifically says different.
The question gives the betas for both companies not to confuse but to test that you know which beta is relevant for the exercise.
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