Which of the Following Is NOT a Potential Problem with Beta

question 21

Multiple Choice

Which of the following is NOT a potential problem with beta and its estimation?

• A) Sometimes a security or project does not have a past history which can be used as a basis for calculating beta.
• B) Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different than the "true" or "expected future" beta.
• C) The beta of an "average stock," or "the market," can change over time, sometimes drastically.
• D) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• E) All of the statements above are potentially serious problems.

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Definitions:

British Soil

Land or territory that is under the jurisdiction and sovereignty of the United Kingdom.

Slaves

Individuals who were forcibly taken from Africa and other regions to work without freedom or personal rights, primarily in agriculture, domestic work, and industry, in various parts of the world, including the Americas.

Capacitive Reactance

Capacitive reactance is the opposition that a capacitor offers to alternating current (AC) due to its capacitance, measured in ohms.

Applied Frequency

The frequency at which an alternating current (AC) or electromagnetic wave is applied to a circuit or device.