Which of the Following Statements Is Most Correct

question 48

Multiple Choice

Which of the following statements is most correct?

• A) Suppose the returns on two stocks are negatively correlated. One has a beta of 1.2 as determined in a regression analysis, while the other has a beta of -0.6. The returns on the stock with the negative beta will be negatively correlated with returns on most other stocks in the market.
• B) Suppose you are managing a stock portfolio, and you have information which leads you to believe that the stock market is likely to be very strong in the immediate future, i.e., you are confident 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.
• C) 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.
• D) Statements a and b are true.
• E) Statements a and c are true.

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Definitions:

Mediastinum

An anatomical region in the central part of the thoracic cavity, between the lungs, containing the heart, esophagus, trachea, thymus, and associated structures.

CPR

Cardiopulmonary resuscitation, a life-saving emergency procedure that combines chest compressions and breaths to support circulation and oxygenation during cardiac arrest.

Generating Blood Pressure

The process by which the heart and blood vessels work together to maintain the force of the blood against the walls of the arteries.

Pulmonary Circulation

The portion of the cardiovascular system which carries deoxygenated blood away from the heart, to the lungs, and returns oxygenated blood back to the heart.