Which of the Following Statements Is Correct

question 123

Multiple Choice

Which of the following statements is correct?

• A)Collections Inc. is in the business of collecting past-due accounts for other companies, i.e., it is a collection agency. Collections' revenues, profits, and stock price tend to rise during recessions. This suggests that Collections Inc.'s beta should be quite high, say 2.0, because it does so much better than most other companies when the economy is weak.
• B)Suppose the returns on two stocks are negatively correlated. One has a beta of 1.2 as determined in a regression analysis using data for the last 5 years, while the other has a beta of -0.6. The returns on the stock with the negative beta will be negatively correlated with returns on most other stocks in the market during that 5-year period.
• C)Suppose you are managing a stock portfolio, and you have information that leads you to believe the stock market is likely to be very strong in the immediate future. That is, you are convinced that the market is about to rise sharply. You should sell your high-beta stocks and buy low-beta stocks in order to take advantage of the expected market move.
• D)You think that investor sentiment is about to change, and investors are about to become more risk averse. This suggests that you should rebalance your portfolio to include more high-beta stocks.

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Definitions:

Gender Roles

Societal norms dictating the behaviors, actions, and roles deemed appropriate for men and women based on their sex.

Psychological Similarities

Traits or characteristics that demonstrate a likeness in mental or emotional processes between individuals or groups.

Genetic Factors

Attributes related to an individual's DNA that influence their physical and mental characteristics.

Identical Twins

Twins who originate from the same fertilized egg and share all of their genetic material, making them genetically identical.