Which of the Following Statements Is FALSE

question 61

Multiple Choice

Which of the following statements is FALSE?

• A)Many practitioners analyze other financial characteristics of a firm when they forecast betas.
• B)U.S.Treasuries are never subject to interest rate risk unless we select a maturity equal to our investment horizon.
• C)If a firm were to change industries,using its historical beta would be inferior to using the beta of other firms in the new industry.
• D)When using historical returns to forecast future betas,we must be mindful of changes in the environment that might cause the future to differ from the past.

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Definitions:

Investment

The commitment of resources such as capital or time to an endeavor with the expectation of obtaining an income or profit.

Percentage Total Return

A measure of the performance of an investment, calculated by dividing the investment's profit by its initial cost.

Dividends

Payments made by a corporation to its shareholder members, usually derived from profits.

Capital Gains Yield

The appreciation in the price of an investment, calculated as the increase in the investment's value divided by its initial purchase price.