Which of the Following Statements Is CORRECT

question 5

Multiple Choice

Which of the following statements is CORRECT?

• A)The CAPM is an ex ante model, which means that all of the variables should be historical values that can reasonably be projected into the future.
• B)The beta coefficient used in the SML equation should reflect the expected volatility of a given stock's return versus the return on the market during some future period.
• C)The general equation: Y = a + bX + e, is the standard form of a simple linear regression where b = beta, and X equals the independent return on an individual security being compared to Y, the return on the market, which is the dependent variable.
• D)The rise-over-run method is not a legitimate method of estimating beta because it measures changes in an individual security's return regressed against time.

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Definitions:

Reabsorbed

The process by which substances are taken back into the blood from the filtrate produced in the kidneys.

Concentration Gradient

A variation in the concentration of a substance across a distance; a key factor in diffusion processes.

Loop Of Henle

A section of the nephron in the kidney that concentrates urine and reabsorbs water and ions.

Reabsorption

The process by which the kidneys filter and then absorb back into the blood certain substances or water from the urine.