Which of the Following Statements Is CORRECT

question 62

Multiple Choice

Which of the following statements is CORRECT?

• A) Sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.
• B) One advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring,whereas scenario analysis cannot account for probabilities.
• C) Well-diversified stockholders do not need to consider market risk when determining required rates of return.
• D) Market risk is important,but it does not have a direct effect on stock prices because it only affects beta.
• E) Simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.

---

Definitions:

Nucleus

The nucleus is a membrane-bound organelle within a cell that contains the genetic material (DNA).

Axon

A long fiber that extends from a neuron and transmits electrical impulses away from the neuron's cell body.

Myelin Sheath

A protective covering made of fatty substances that surrounds the axons of many nerve cells, aiding in the speedy transmission of electrical signals.

Synaptic Vesicles

Small sacs in the neuron that store neurotransmitters, which are released into the synaptic cleft to transmit nerve impulses to other neurons.