Which of the Following Statements Best Explains the Fact That

question 100

Multiple Choice

Which of the following statements best explains the fact that cyclical firms tend to have high betas?

• A) Their earnings are not stable.
• B) Their stocks are overpriced.
• C) Their earnings are less diversifiable.
• D) Their profit margins are small.

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Definitions:

Marginal Tax Rates

The tax rate that applies to each additional dollar of income.

High-Income Taxpayers

Individuals who earn income above a certain threshold and are often subject to higher tax rates or additional taxes.

Borrows Funds

The act of obtaining a certain amount of money from another party, usually financial institutions, under the condition of returning it in the future, often with interest.

Current Expenditures

Expenses a company or government incurs through its daily operations that are not capitalized or reported as investments.