Which One of the Following Statements Concerning Beta Is Correct

question 45

Multiple Choice

Which one of the following statements concerning beta is correct?

• A) The beta assigned to the overall market is zero.
• B) A stock with a beta of 1.2 earns a higher risk premium than a stock with a beta of 1.3.
• C) A stock with a beta of 0.5 has 50 percent more risk than the overall market.
• D) Beta is applied to the T-bill rate when computing the discount rate used for the dividend discount models.
• E) The higher the beta, the higher the discount rate used for the dividend discount models.

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Definitions:

Cournot Duopoly

A model of competition between two firms, in which each firm decides the quantity to produce independently and simultaneously with the goal of maximizing profit.

Perfectly Competitive

A market structure characterized by a large number of small firms, all selling identical products, where no single firm can influence the market price.

Monopoly Price

The price a monopolist sets, which is typically higher than both marginal and average costs, maximizing profits due to lack of competition.

Remarkable Healing

An extraordinary or exceptional process of recovery from an injury or disease.