Consider the Following Two Statements: (I) the Market Beta Is

question 29

Multiple Choice

Consider the following two statements: (i) The market beta is the standardized variance of the market portfolio.
(ii) The market beta is an appropriate measure of risk under the assumptions of homogenous
Expectations and riskless borrowing and lending.

• A)(i) is correct and (ii) is incorrect.
• B)(ii) is correct and (i) is incorrect.
• C)(i) and (ii) are both correct.
• D)(i) and (ii) are both incorrect.
• E)There is no such thing as a market beta.

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Definitions:

Cash-flow Problems

Financial issues arising from an imbalance between the cash entering and exiting a business, potentially impairing its operations.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay outstanding debts. The process begins with a petition filed by the debtor, which is most common.

Financial Management

The strategic planning, organizing, directing, and controlling of financial activities such as procurement and utilization of funds to achieve organizational goals.

Cash Flows

The total amount of money being transferred into and out of a business, often analyzed for evaluating the liquidity, flexibility, and overall financial health of the entity.