Which of the Following Is NOT a Potential Problem When

question 85

Multiple Choice

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

• A) 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.
• B) The beta of an "average stock," or "the market," can change over time, sometimes drastically.
• C) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• D) All of the statements above are true.
• E) The fact that a security or project may not have a past history that can be used as the basis for calculating beta.

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Definitions:

Quantity Of Resources

The total amount of various inputs, including labor, capital, and natural resources, available for use in the production of goods and services.

Opportunity Cost

The benefit that is missed out on when choosing one alternative over another.

Moving From Point

The action of changing positions or conditions, often used in the context of shifting from one economic state or decision point to another.

Economy's Resources

The total assets including labor, capital, land, and entrepreneurship available for the production of goods and services in an economy.