Assume Each Firm Within an Industry Has Similar Operations and Financial

question 68

Multiple Choice

Assume each firm within an industry has similar operations and financial structures as the industry as a whole.Which one of these statements related to beta is correct given this assumption?

• A)Industry betas are less reliable than firm betas.
• B)Firms should use their own betas rather than the industry beta.
• C)Betas should be computed on an annual basis.
• D)The error in beta estimation for a single security exceeds the error for a portfolio of securities.
• E)All firms in the industry will have the same beta.

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Definitions:

Course of Dealing

The history of conduct between parties in a transaction, which can help interpret their agreement and obligations.

Perfect Tender Rule

a legal principle under the UCC that requires sellers to deliver goods that exactly meet the terms of the contract with the buyer.

Substantial Performance

A legal principle allowing a party to enforce a contract if they have fulfilled enough of its terms to warrant payment, even if there are minor breaches.

Entry Conflict

The initial disagreement or discord that arises when entering a new situation, group, or environment, often due to differing expectations or norms.