Which of the Following Is NOT a Potential Problem When

question 8

Multiple Choice

Which of the following is NOT a potential problem when estimating and using betas,i.e. ,which statement is FALSE?

• A) The fact that a security or project may not have a past history that can be used as the 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 from 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) The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns.This calculated historical beta may differ from the beta that exists in the future.

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Definitions:

Hybridization

A concept in chemistry where atomic orbitals mix to form new hybrid orbitals, explaining the bonding in molecules.

Atom

The basic unit of a chemical element, consisting of a nucleus of protons and neutrons, with electrons orbiting the nucleus.

Molecule

The smallest particle in a chemical element or compound that has the chemical properties of that element or compound, consisting of two or more atoms bonded together.

Constitutional Isomer

Molecules with the same molecular formula but different arrangements of atoms in space.