Which of the Following Statements Is CORRECT

question 73

Multiple Choice

Which of the following statements is CORRECT?

• A) One advantage of sensitivity analysis relative to scenario analysis is that it explicitly takes into account the probability of specific effects occurring, whereas scenario analysis cannot account for probabilities.
• B) Well-diversified stockholders do not need to consider market risk when determining required rates of return.
• C) Market risk is important, but it does not have a direct effect on stock prices because it only affects beta.
• D) Simulation analysis is a computerized version of scenario analysis where input variables are selected randomly on the basis of their probability distributions.
• E) Sensitivity analysis is a good way to measure market risk because it explicitly takes into account diversification effects.

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Definitions:

Equilibrium Price

The rate at which the supply of a product from manufacturers equals the demand from consumers, leading to a state of balance in the market.

Blu-ray Discs

High-definition optical disc format used for data storage and as a medium for video playback.

DVDs

Digital Versatile Discs, a type of optical storage media used for playing movies, software, and other data.

Efficiency

Optimal allocation of resources to ensure the best possible outcome or utility with minimal waste or inefficiency.