You Expect General Motors (GM)to Have a Beta of 1

question 49

Multiple Choice

You expect General Motors (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil (XOM) to be 0.9 over the next year.Also,you expect the volatility of General Motors to be 40% and that of Exxon Mobil to be 30% over the next year.Which stock has more systematic risk? Which stock has more total risk?

• A)XOM,GM
• B)XOM,XOM
• C)GM,XOM
• D)GM,GM
• E)They both have the same risks.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of receivables that may not be collected.

Net Realizable Value

The estimated selling price of goods minus the cost of their sale or completion, used to assess inventory value under GAAP standards.

Aging of Accounts Receivable

A method to manage and review accounts receivable based on the length of time invoices have been outstanding, typically to identify and act on overdue payments.

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.