Which of the Following Statements About Beta Is Correct

question 15

Multiple Choice

Which of the following statements about beta is correct?

• A)Firms with greater systematic risk volatilities than the market have betas that are less than 1.0, and firms with smaller systematic risk volatilities than the market have betas that are greater than 1.0.
• B)Firms with greater systematic risk volatilities than the market have betas that are greater than 1.0, and firms with smaller systematic risk volatilities than the market have betas that are less than 1.0.
• C)Firms with greater systematic risk volatilities than the market have betas that are less than zero, and firms with smaller systematic risk volatilities than the market have betas that are greater than zero.
• D)Firms with greater unsystematic risk volatilities than the market have betas that are less than 1.0, and firms with smaller unsystematic risk volatilities than the market have betas that are greater than 1.0.
• E)Firms with greater unsystematic risk volatilities than the market have betas that are greater than 1.0, and firms with smaller unsystematic risk volatilities than the market have betas that are less than 1.0.

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Definitions:

Income Taxes

Income taxes are taxes levied by governments on the profit of companies and income of individuals, subject to diverse regulations and rates.

LIFO Advantage

A financial benefit that comes from using the Last In, First Out method of inventory valuation, often resulting in lower taxes in periods of inflation.

Rising Prices

A situation in an economy where the general level of prices for goods and services is increasing, often referred to as inflation.

Holding Gains

Holding gains are the increased values of assets that a company holds, realized when the asset is sold or revalued.