Which of the Following Is Not a Difficulty Concerning Beta

question 63

Multiple Choice

Which of the following is not a difficulty concerning 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.

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Definitions:

Framing

The way information is presented or structured, affecting perception and decision-making.

Illogical Preferences

Choices or decisions made that contradict rational decision-making models or that do not follow logical consistency.

Reference Points

Specific targets or standards against which subsequent achievements, experiences, or the current status can be compared.

Goal Setting

The process of identifying specific, measurable, and time-targeted objectives.