Which of the Following Statements Is Most Correct

question 66

Multiple Choice

Which of the following statements is most correct?

• A) The required return on a firm's common stock is determined by the firm's systematic (or market)risk.If its systematic risk is known,and if it is expected to remain constant,the analyst has sufficient information to specify the firm's required return.
• B) A security's beta measures its nondiversifiable (systematic,or market)risk relative to that of most other securities.
• C) If the returns of two firms are negatively correlated,one of them must have a negative beta.
• D) A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock.
• E) Statements b and c are both correct.

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Definitions:

High-Priced Insurance

High-Priced Insurance refers to insurance policies that come with significantly higher premiums, often due to higher risks associated with the insured entity or property.

Pollution Controls

Measures and technologies applied to reduce or eliminate the emission of pollutants into the environment.

Ecological Economists

Experts who study the relationship between ecosystems and economic systems, focusing on sustainability and the economic impacts of environmental policies.

Neoclassical View

An economic perspective that emphasizes the role of supply and demand in markets and the efficiency of market outcomes.