Which of the Following Is NOT a Potential Problem with Beta

question 31

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 "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) There is a wide confidence interval around a typical stock's estimated beta.

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Definitions:

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The cognitive process of selectively concentrating on one aspect of the environment while ignoring others.

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Benefits or improvements, often resulting from investment, effort, or development in various contexts.

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