Which One of These Statements Related to Beta Is Correct

question 64

Multiple Choice

Which one of these statements related to beta is correct?

• A)A firm with a given sales cyclicality can reduce its beta by replacing variable production costs with fixed costs.
• B)The beta of debt is generally assumed to equal the market beta.
• C)Highly cyclical stocks tend to have low betas.
• D)The levered beta of equity exceeds the asset beta.
• E)Stocks with a high variance must have a high beta.

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Definitions:

Economic Model

A simplified representation of economic processes, often using mathematical formulas or graphs, to analyze behavior and predict outcomes.

Inductive Reasoning

A method of reasoning in which a conclusion is reached based on the observation of specific instances or patterns.

Variable Theory

A conceptual framework that outlines how variables interact within a particular study or model.

Normative Economics

A branch of economics that expresses value judgments about economic fairness or what the outcome of the economy or goals of public policy ought to be.