Which of Following Is a Situation in Which You Would

question 47

Multiple Choice

Which of following is a situation in which you would want to use the CAPM approach for estimating the component cost of equity?

• A)When you are able to estimate the market risk premium with certainty.
• B)When you are able to estimate the risk-free rate with certainty.
• C)When you are able to estimate the firm's beta with certainty.
• D)When the firm pays a constant dividend.

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Definitions:

Spreading Attitude Effect

A liked or disliked person (or attitude object) may affect not only the evaluation of a second person directly associated but also others merely associated with the second person.

Automatic Activation

According to Fazio, attitudes that have a strong evaluative link to situational cues are more likely to automatically come to mind from memory.

Moderator Variable

A variable that qualifies an otherwise simple hypothesis with a view to improving its predictive power (e.g., A causes B, but only when C (the moderator) is present).

Improve Prediction

Enhancing the accuracy or effectiveness of forecasting future events or outcomes based on current data or trends.