Assume Each Firm Within an Industry Has Similar Operations and Financial

question 37

Multiple Choice

Assume each firm within an industry has similar operations and financial structures as the industry as a whole.Which one of these statements related to beta is correct given this assumption?

• A)Industry betas are less reliable than firm betas.
• B)Firms should always use their own betas rather than the industry beta.
• C)A change in a company's use of financial leverage has no effect on the company's beta.
• D)The error in beta estimation for a single security exceeds the error for a portfolio of securities.
• E)All firms in the industry will have the same beta.

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Definitions:

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without any prior learning.

Aquarium Light

A specialized form of lighting designed to simulate natural light and promote the health and behavior of aquatic plants and animals in aquariums.

Conditioned Stimulus

Within classical conditioning, an initially neutral stimulus becomes linked with an unconditioned stimulus and ultimately elicits a conditioned response.

Neutral Stimulus

In conditioning, a stimulus that initially elicits no specific response other than focusing attention, which can eventually elicit a conditioned response when paired with an unconditioned stimulus.