Which of the Following Is NOT a Potential Problem When

question 7

Multiple Choice

Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSEσ

• A) sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta.
• B) the beta of an "average stock," or "the market," can change over time, sometimes drastically.
• C) sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• D) all of the statements above are true.
• E) the fact that a security or project may not have a past history that can be used as the basis for calculating beta.

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