Which of the Following Statements Is CORRECTσ

question 16

Multiple Choice

Which of the following statements is CORRECTσ

• A) if you found a stock with a zero historical beta and held it as the only stock in your portfolio, you would by definition have a riskless portfolio.
• B) the beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns. one could also construct a scatter diagram of returns on the stock versus those on the market, estimate the slope of the line of best fit, and use it as beta. however, this historical beta may differ from the beta that exists in the future.
• C) the beta of a portfolio of stocks is always larger than the betas of any of the individual stocks.
• D) it is theoretically possible for a stock to have a beta of 1.0. if a stock did have a beta of 1.0, then, at least in theory, its required rate of return would be equal to the risk-free (default-free) rate of return, rrf.
• E) the beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks.

Understand the principles and challenges of collusion among firms in an oligopoly.

Identify the conditions under which a cartel is likely to form and the factors leading to its potential disintegration.

Grasp the strategic considerations firms must undertake in price setting within monopolistic and oligopolistic market structures.

Comprehend the relationship between marginal revenue, marginal cost, and profit maximization for monopolists.

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Definitions:

Issuer

An entity that develops, registers, and sells securities to finance its operations, such as corporations or governmental bodies issuing bonds or stocks.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act is a United States federal law that set new or expanded requirements for all U.S. public company boards, management, and public accounting firms, aiming to protect investors from fraudulent financial reporting.

Securities Regulations

Securities regulations are laws and rules designed to govern the trading, offering, and sale of securities to protect investors and ensure the fair functioning of securities markets.

SEC

Stands for the Securities and Exchange Commission, a U.S. federal agency responsible for regulating the securities industry and ensuring fair and efficient markets.