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.

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Definitions:

Hypotheses Testing

A method of statistical inference that is used to decide whether the data at hand sufficiently support a particular hypothesis.

Senatorial Election

A political process through which individuals are elected to represent a state or equivalent entity in the senate.

Expected Value

The average of all possible outcomes of a random variable, weighted by their respective probabilities.

Sample Proportions

Statistics used to estimate the fraction or percentage of a population that exhibits a particular characteristic, based on a sample.