Which of the Following Statements Is Correct

question 121

Multiple Choice

Which of the following statements is correct?

• A)If a company with a high-beta stock merges with a low-beta company, the best estimate of the new merged company's beta is 1.0.
• B)The beta of an "average stock," or "the market," can change over time, sometimes drastically.
• C)If a newly issued stock does not have a past history that can be used as a basis for calculating beta, then we should always estimate that its beta will turn out to be 1.0. This is especially true if the company finances with more debt than the average firm.
• D)During a period when a company is undergoing a change such as increasing its use of leverage or taking on riskier projects, the calculated historical beta may be drastically different than the "true" or "expected future" beta.

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Definitions:

Planning Process

A series of steps that include setting goals, developing strategies, and outlining tasks and schedules to achieve those goals.

Steps

A series of actions or stages taken in order to achieve a particular end.

Adaptive

Refers to the ability of an organism to adjust and change its behavior, structure, or physiology to become more suited to its environment.

Abundance

The great quantity or amount of something in a given area or volume.