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Dear sir,
Please help me with this question. I extracts it from June 2015 past exam paper.
Why is statement no. 3 incorrect?
Which of the following statements is/are correct?
(1) The asset beta reflects both business risk and financial risk
(2) Total risk is the sum of systematic risk and unsystematic risk
(3) Assuming that the beta of debt is zero will understate financial risk when ungearing an equity beta
A 2 only
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
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