Which of the Following Statements Is Correct

question 24

Multiple Choice

Which of the following statements is correct?

• A) Collections Inc. is in the business of collecting past-due accounts for other companies, i.e., it is a collection agency. Collections' revenues, profits, and stock price tend to rise during recessions. This suggests that Collections Inc.'s beta should be quite high, say 2.0, because it does so much better than most other companies when the economy is weak.
• B) Suppose the returns on two stocks are negatively correlated. One has a beta of 1.2 as determined in a regression analysis using data for the last 5 years, while the other has a beta of -0.6. The returns on the stock with the negative beta will be negatively correlated with returns on most other stocks in the market during that 5-year period.
• C) Suppose you are managing a stock portfolio, and you have information that leads you to believe the stock market is likely to be very strong in the immediate future. That is, you are convinced that the market is about to rise sharply. You should sell your high-beta
• Stocks and buy low-beta stocks in order to take advantage of the expected market move.
• D) You think that investor sentiment is about to change, and investors are about to become more risk averse. This suggests that you should rebalance your portfolio to include more high-beta stocks.

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Definitions:

Tubular Reabsorption

Movement of materials, by means of diffusion, active transport, or symport, from the filtrate within a nephron to the blood.

Tubular Secretion

A process in the nephrons of the kidneys where substances are added to the tubular fluid for excretion, helping to regulate blood pH and remove toxins.

Urine Volume

The total amount of urine excreted by the kidneys over a given period, important in assessing kidney function and fluid balance.

Medullary Concentration Gradient

A gradient responsible for the osmoregulation in the kidneys, allowing for the concentration or dilution of urine.