Which of the Following Is NOT a Potential Problem When

question 10

Multiple Choice

Which of the following is NOT a potential problem when estimating and using betas, i.e., which statement is FALSE?

• A) Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different from the "true" or "expected future" beta.
• B) The beta of an "average stock, " or "the market, " can change over time, sometimes drastically.
• C) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• D) All of the statements above are true.
• E) The fact that a security or project may not have a past history that can be used as the basis for calculating beta.

---

Definitions:

Openness

One of the five major dimensions of personality, characterized by an appreciation for art, emotion, adventure, unusual ideas, imagination, curiosity, and variety of experience.

Creative

Relating to or involving the imagination or original ideas, especially in the production of an artistic work.

Nonconforming

The act or condition of not adhering to a traditional norm or standard.

Big Five Traits

The Big Five traits are a model in psychology that outlines five broad dimensions of personality: openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.