Which of the Following Statements Is CORRECT

question 121

Multiple Choice

Which of the following statements is CORRECT?

• A) Collections Inc.is in the business of collecting past-due accounts for other companies,i.e. ,it is a collection agency.Collections' revenues,profits,and stock price tend to rise during recessions.This suggests that Collections Inc.'s beta should be quite high,say 2.0,because it does so much better than most other companies when the economy is weak.
• B) Suppose the returns on two stocks are negatively correlated.One has a beta of 1.2 as determined in a regression analysis using data for the last 5 years,while the other has a beta of -0.6.The returns on the stock with the negative beta must have been negatively correlated with returns on most other stocks during that 5-year period.
• C) Suppose you are managing a stock portfolio,and you have information that leads you to believe the stock market is likely to be very strong in the immediate future.That is,you are convinced that the market is about to rise sharply.You should sell your high-beta stocks and buy low-beta stocks in order to take advantage of the expected market move.
• D) You think that investor sentiment is about to change,and investors are about to become more risk averse.This suggests that you should re-balance your portfolio to include more high-beta stocks.
• E) If the market risk premium remains constant,but the risk-free rate declines,then the required returns on low-beta stocks will rise while those on high-beta stocks will decline.

Comprehend the implications of price ceilings and floors in market equilibrium.

Analyze the factors that determine the incidence of tax between buyers and sellers.

Evaluate the impact of government interventions such as taxes, price ceilings, and floors on market outcomes.

Understand the role of elasticity in determining market reactions to taxes and price controls.

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Definitions:

Arbitration Clause

An arbitration clause is a section in a contract that requires the parties to resolve disputes through arbitration instead of going to court.

Insurance Dispute

A disagreement between an insurance provider and a policyholder regarding the coverage or compensation terms of an insurance policy.

Commercial General Liability Policy

An insurance policy designed to provide coverage to businesses for bodily injury, personal injury, and property damage caused by the business’s operations or products.

Personal Injury Suits

Legal actions initiated by individuals seeking compensation for injuries they have suffered due to someone else's negligence or wrongdoing.