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.