Which of the Following Statements Is False

question 72

Multiple Choice

Which of the following statements is false?

• A) Beta is the expected percent change in the excess return of the security for a 1% change in the excess return of the market portfolio.
• B) Beta represents the amount by which risks that affect the overall market are amplified for a given stock or investment.
• C) It is common practice to estimate beta based on the historical correlation and volatilities.
• D) Beta measures the diversifiable risk of a security, as opposed to its market risk, and is the appropriate measure of the risk of a security for an investor holding the market portfolio.

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Definitions:

Natural Monopoly

A scenario in which a single company is able to offer a product or service more cheaply than any possible rivals, usually as a result of benefiting from the economies of scale.

Profit-Maximizing

Profit-maximizing is the process or strategy employed by businesses to adjust their production and sale operations to achieve the highest possible profit.

Firm

A business organization, such as a corporation, partnership, or sole proprietorship, engaged in commercial, industrial, or professional activities.

Operating

The act of conducting business or maintaining functions within an organization or system.