Which of the Following Statements Is Most Correct

question 103

Multiple Choice

Which of the following statements is most correct?

• A)More firms fail or suffer financial distress during periods of economic expansion than during periods of economic recession.Thus, investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one.
• B)More firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus, investors tend to require lower premiums to compensate for default risk when the economy is in a recession or is expected to enter one.
• C)Fewer firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus, investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one.
• D)Fewer firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus, investors tend to require lower premiums to compensate for default risk when the economy is in a recession or is expected to enter one.
• E)none of the above

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Definitions:

F-test

A statistical test used to compare the variances of two samples to determine if they come from populations with equal variances.

Population Variances

A measure of the variability or spread of a population's data points, representing the average of the squared deviations from the mean.

Two-tail Test

A statistical test used to determine whether there is a significant difference between a sample and a population mean in either direction.

Sample Variances

A measure of the spread or dispersion of a set of sample data points.