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

question 56

Multiple Choice

You expect General Motors (GM) to have a beta of 1.5 over the next year and the beta of Exxon Mobil (XOM) to be 1.9 over the next year.Also,you expect the volatility of General Motors to be 50% and that of Exxon Mobil to be 35% over the next year.Which stock has more systematic risk? Which stock has more total risk?

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

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Definitions:

Analyzing Business Transactions

The process of reviewing, categorizing, and interpreting the financial activities within a business to understand their impact on the financial statements.

Preparing Closing Entries

The procedure of transferring all income statement balances to permanent accounts at the end of an accounting period to prepare for the next period.

Fiscal Year

A one-year period that companies use for financial reporting and budgeting, which does not necessarily align with the calendar year.

Accounting Period

A specific period of time used by businesses to calculate their financial results and prepare financial statements, such as a month, quarter, or year.