Which of the Following Statements Is CORRECT

question 26

Multiple Choice

Which of the following statements is CORRECT?

• A) one advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring, whereas scenario analysis cannot account for probabilities.
• B) well-diversified stockholders do not need to consider market risk when determining required rates of return.
• C) market risk is important, but it does not have a direct effect on stock prices because it only affects beta.
• D) simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.
• E) sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.

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Definitions:

Reward Systems

Mechanisms within an organization to recognize and reward employee performance, contributing to motivation and satisfaction.

Competition

The rivalry between entities for dominance or achieving a goal, which can occur in markets, sports, academics, or any field of endeavor.

Win-lose Competition

A competitive scenario where one party's gain is directly correlated with the other's loss, emphasizing the zero-sum nature of some competitions.

Collaboration

The action of working with someone to produce or create something, especially in a learning or professional context.