When Evaluation of One's Performance Is Based on a Comparison

question 157

Multiple Choice

When evaluation of one's performance is based on a comparison with how others performed,

• A) the evaluation is less accurate.
• B) the quality of performance necessarily increases.
• C) one will over invest in performance-enhancing activities.
• D) the quality of performance necessarily decreases.
• E) one will under invest in performance-enhancing activities.

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Definitions:

Risk Free Rate

An interest rate at which an investor expects to earn on an investment with zero risk.

Expected Constant Growth Rate

The steady rate at which a company’s dividends or earnings are anticipated to grow indefinitely.

Intrinsic Value

An estimate of the true value of an asset, including tangibles and intangibles, based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

Beta Coefficient

An index of a security's fluctuation in value as compared to the broader market, signifying its relative risk versus the average market risk.