Which of the Following Statements Is FALSE

question 30

Multiple Choice

Which of the following statements is FALSE?

• A)The substantial use of stock and option grants in the 1990s greatly increased managers' pay-for-performance sensitivity.
• B)The optimal level of sensitivity of managers' compensation to the performance of their firms depends on the managers' level of risk aversion,which is hard to measure.
• C)While decreasing managers' risk exposure,increasing the sensitivity of managerial pay and wealth to firm performance does have some negative effects.
• D)In the absence of monitoring,the other way the conflict of interest between managers and owners can be mitigated is by closely aligning their interests through the managers' compensation policy.

Understand the implications of the single-index model for the calculation of covariances between assets.

Comprehend the role of macroeconomic and firm-specific events in affecting asset returns within a factor model.

Appreciate how firm characteristics and industry groups may predict a firm’s beta.

Describe the process of beta adjustment over time using regression analysis.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired.

End-Of-Period Spreadsheet

A document summarizing a company's financial activities and balances at the close of an accounting period, aiding in the preparation of financial statements.

Double Rule

A method used in accounting to underline a summary amount twice to indicate a total, final, or especially significant figure.

End-Of-Period Spreadsheet

A comprehensive document or tool used to compile accounting information before finalizing financial statements, aiding in the review and adjustment of account balances.