The Beta of ABC Co

question 24

Multiple Choice

The beta of ABC Co. stock is the slope of

• A) the security market line.
• B) the characteristic line for a plot of returns on the S&P 500 versus returns on short-term Treasury bills.
• C) the arbitrage pricing line.
• D) the line of best fit for a plot of ABC Co. returns against the returns of the market portfolio for the same period.

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Definitions:

Variable Costs

Costs that fluctuate in direct proportion to changes in production volume or activity level.

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance.

Direct Labor Budget

A financial plan that estimates the cost of direct labor required to meet production goals.

Budgeted Production

The total number of units a company plans to produce in a specific period, according to its budget.