Which of the Following Statements Is CORRECT

question 55

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 must have been negatively correlated with returns on most other stocks 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 re-balance your portfolio to include more high-beta stocks.

Understand the concepts of bond valuation, interest computations, and amortization methods.

Comprehend the disclosure requirements for various types of liabilities and the financial statement presentation.

Calculate and record transactions related to notes payable and interest expense.

Recognize the proper treatment and recording of payroll and related liabilities.

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Definitions:

Message Inclusion

The practice of ensuring all relevant information or themes are encapsulated within a communication or document.

Additional Information

Supplementary details or data provided to enhance understanding or clarify a subject.

Unethical Practice

Actions or behaviors that violate moral or professional guidelines.

Quarterly Report

A financial statement issued by a company every quarter, detailing earnings, expenses, and net profits to inform investors and stakeholders.