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:

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