If Last Month a Stock with Beta of 1

question 75

Multiple Choice

If last month a stock with beta of 1.0 lost 2% while the S&P 500 had a 1% gain,then it appears that:

• A) beta has been calculated incorrectly.
• B) the S&P 500 cannot represent the market.
• C) the firm may have released negative information.
• D) the market index had a good month.

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Definitions:

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, giving each some degree of market power while still allowing for free entry and exit in the market.

Fixed Costs

Expenses that remain constant regardless of business activity levels, including lease payments and insurance premiums.

Short Run

A period in which at least one factor of production is fixed and cannot be changed, limiting the firm's ability to adjust fully to market changes.

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, allowing for some degree of market power.