Assume Each Firm Within an Industry Has Similar Operations and Financial

question 74

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:

Transit

The act or process of moving people or goods from one place to another.

Common Carrier

An entity that offers transportation services to the public under the license or authority provided by a regulatory body, obligated to serve without discrimination.

Shipping Arrangements

The planning and execution involved in the transportation of goods from one location to another, including modes of transport, routes, and logistics.

Shipping Term

Contractual terms between a seller and buyer indicating the delivery details, responsibility for goods, and the point at which risk transfers from one party to the other during transport.