Which One of the Following Statements Concerning Beta Is Correct

question 76

Multiple Choice

Which one of the following statements concerning beta is correct?

• A)The beta assigned to the overall market is zero.
• B)A stock with a beta of 1.2 earns a higher risk premium than a stock with a beta of 1.3.
• C)A stock with a beta of .5 has 50 percent more risk than the overall market.
• D)Beta is applied to the T-bill rate when computing the discount rate used for the dividend discount models.
• E)The higher the beta, the higher the discount rate used for the dividend discount model.

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Definitions:

Disclosure

Disclosure is the act of making new or secret information known, often related to corporate, legal, or personal contexts.

Halo Effect

A cognitive bias where an observer's overall impression of a person, company, brand, or product influences feelings and thoughts about that entity's character or properties.

Negative Impression

An unfavorable or detrimental perception or judgment formed about someone or something based on their actions or presentation.

Projection Bias

A cognitive bias where individuals overestimate how much their future selves will share their current preferences, feelings, and values.